Late payments: How Safe is YOUR Business?

How vulnerable is your business to late payments and non payments of bills because you don’t have your own house in order?

It’s bad enough having to chase late payments from those who’ve received your products or services and are deliberately avoiding contact with you; having to do it because of sloppiness in your own organization that you’ve allowed to seep in is not far short of criminal. Especially when you realize that more companies go out of business through cash flow problems than for any other reason…

Remember: Nothing is ‘sold’ until you have the cash in your account, so let’s check out rules you can easily apply upfront and then look at simple ways to deal with late payment! :-)

6 Rules for New Customer Accounts

  1. Be clear about who can authorize payment for any products or services you provide
  2. Know what needs to be signed or how they confirm an invoice is due to be paid
  3. Establish where the invoice should be sent
  4. Know whether reference to a purchase order needs to be made
  5. Make sure accurate invoices go out on time
  6. Make sure your payment terms and conditions are crystal clear and understood

If you’re at all unsure of how closely the above rules are applied in your organization, just turn each one into a question – you’ll soon find out from the answers how tightly (or otherwise) your particular business ship is being run…

Chasing Late Payment of Bills

Provided you’re satisfied everything is in order and there is no reason from your point of view that payment should not be immediately forthcoming, you need to get onto customers as soon as they are outside those agreed terms of yours.

The best way would be to avoid the necessity of chasing late payment altogether by only providing the product or service on receipt of money, or offering attractive discount savings to encourage prompt payment.

However, if neither of these options is available to you or applicable to your business, ensure that you make one to one contact: Communication from a ‘faceless’ company is much easier to ignore or give the runaround to.

The telephone can be a very useful tool in this situation, second only to presenting yourself at the customer’s premises – and you can get through at least 5 times as many phone calls in the time it would take for a visit!

6 Tips

  1. Be prompt in chasing – you’ve already provided the service or product
  2. You are entitled to the money by the agreed time
  3. The longer you leave it to chase your money, the further down the queue you’ll go when any bills do get paid
  4. If you are getting the run around from the customer company, the person who made the sale should speak initially to the Decision Maker who bought from your company – three reasons for this
    • This is the person who values the purchase
    • This is the person with whom your company is building an ongoing business relationship
    • In short, this person has a vested interest in keeping you sweet – I can remember numerous occasions when I’ve been on the buying side of the equation and stood over Financial Directors and made them write out a cheque after I’d received a telephone call from a totally fed up supplier!
  5. Don’t back down – be prepared to state your case to the top man or woman
  6. Be pleasant but firm – no-one wins if a slanging match is allowed to develop

I’ve always found that if you know your customers and build a strong business relationship with them, apply the 6 Rules, and follow the 6 Tips, you rarely need to go the legal route.

Still, late payments are affecting more and more of us so please share any ideas, systems, practices that you’ve tried and made work for you! :-)

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3 Responses to “Late payments: How Safe is YOUR Business?”

  1. This is a very timely reminder.

    I always set very clear terms of business and always chase if people don’t adhere to them. I’m much better these days at setting up projects will billing points and milestones that mean we don’t keep on working if payment is late.

  2. Babs says:

    Thank you for sending me here, Linda – you’re absolutely right. How come we don’t actually do these things when they seem really quite simple and straightforward.

  3. […] over at Small Business Training I have posted about Late Payments – How vulnerable is your business to late payments and non payments of bills because you […]

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