Some Small Business Owners I’ve known unfortunately shoot themselves in the foot by issuing out maximum credit terms.
I understand, it may be one of your biggest Customers – and you need to keep them happy …
… but if you offer them terms, they are unlikely to pay within the normal 30 day term period.
Are you doing enough to avoid these pitfalls?
If you’re just starting out in business or you need a better framework to govern your bad or late paying customers, here are 8 tips for you:
If at all possible, get your Customers to pay a higher deposit.
By paying a higher deposit, you are mitigating your risk position.
For instance, if you feel that your Customer is likely to not make payment, request that they clear (at the very least) a deposit amount to you, before you start any work for them.
The standard two, three month payment plans to be made consecutively over a set number of weeks.
OR, if it’s a high value contract, over a set number of months.
That way you mitigate the risk of not getting paid by asking them to pay you 30 days after terms have been issued.
There are many a public sector organisation or large corporate company that insists that the only way you are likely to receive payment is on the back of their PO number being approved.
This is an arduous process, contact me for more information on this.
I implore all business owners to either obtain a credit checking package, or find someone that can.
For instance, we can credit check a new business for you. As well as advise you of certain pitfalls in your Customer area to make you aware of any benefits and risk factors.
“Credit checks aren’t worth it”, I hear you say.
Well, yes they are, but if you think they’re a waste of your time, then there are invaluable resources that you can look through to ascertain whether or not the Customer is being truthful.
One of my clients recently requested I run a credit check on a Company that was fairly well established, for 20 or so years.
Yet, on their website they advertised that the company in question had been dormant.
Being dormant meant they hadn’t filed any accounts, and therefore could not build up a credit rating.
I advised my client to avoid it, or continue at their own risk.
Here are some free websites you can use to determine whether or not a company is still trading:
Social Media Check
Similar to a sense check for Customers who are realising their social identity.
This will give you some picture of recent Sustainability Accountancy changes that are taking place right now, detailing our need to be recognised.
Terms and Conditions (Online & Offline)
Make sure your Website Terms and Conditions are up to par.
They can be open to scrutiny and if you participate in Distance Selling, then you could find yourself on the wrong end of the Courts.
Offline terms could relate to your contracts, and payment terms and conditions.
I would recommend obtaining as much help as you can from an expert.
If you feel that improvement could be made to avoid leaving you gasping when it comes down to it.
Its Free and it can open up an extra income stream into your business, and I would highly recommend all Businesses start utilising this valuable tool.
For further information on how to do this, get in touch.
There is no right or wrong answer for those looking to manifest a Credit or Payment Policy.
If you need any assistance, then please do not hesitate to get in contact and we can help guide you.