"Money's too tight to mention!" Article by Tina Zawila

One of the most common challenges in business is “getting paid by customers”.  Just this week, I have spoken with three different clients, in three very different industries, all with the same problem – how can I get my clients/customers to pay me??!!

It seems that in the lead up to Christmas some customers are re-prioritising their available cash – for Christmas parties, Christmas bonuses, etc and therefore stringing out their suppliers/creditors and opting not to pay their accounts on time.   This creates a vicious cycle, the supplier then has difficulty paying their suppliers and on it goes.  I suggest that this situation may only worsen in the new year, when many will still be short of cash in January.

One small business owner from NSW had a “rant” on social media questioning why people would book their cars/trucks (he is an auto mechanic) in for servicing and repairs and then arrive to collect their vehicles without the money to pay for the work.  He made a good point – you can’t go to Woolies/Coles and fill your trolley and then ask for credit terms at the check out!

It is a common frustration, but not one without a solution.  It all comes down to systems, policies and procedures, and it starts with communication.

1.       You must have a clear credit policy and it must be communicated with your client/customer before you provide products or services.  Do not take the customer’s order until you know how and when you will be paid.

2.       You must have a system to actively monitor and action outstanding debtor balances to ensure your credit policy is adhered to and enforced. 

3.       Make it as easy as possible for your customers to pay – cash, cheque, EFTPOS, credit card, BPay etc.

However, if you do end up with overdue accounts, the three keys to collecting the cash are:

1.       Start early – don’t wait to follow up – as soon as the account is overdue contact the debtor.

2.       Always be the good guy – a series of gentle and non-confrontational reminders will get most of the honest customers to pay.

3.       Be persistent – you have been clear with your credit policy upfront, this process is now about demonstrating to the client that you will actively enforce your credit terms.

When it comes to collecting cash, the old saying “the squeaky wheel gets the oil” applies.  The supplier that constantly and consistently follows up their customers for payment will generally be the first one they will pay when the cash is available.  

If you need advice or assistance in this area, please call us on 4972 1300 and ask for our Fact Sheet titled “How to Reduce Your Outstanding Debtor Balances” for more detailed tips and templates.