Small Business Owners - They Owe You The Money Why Dont They Pay?

Doesn't it frustrate you when you've given good service, sometimes super service, and the customer doesn't pay you?

Some of them aren't doing too well and are struggling for cash, but, gee, so are you. In the time they take to pay they could have paid off a little each week and the debt would be gone.

You know others have the money but it takes them six months of sending them copy after copy of invoices, letters and telephone calls before they open their purse?

And often the worst are Government Departments and large businesses. You don't want to lose sales to these customers but your cash-flow is hurting and you dropped your price to get the contract as well.

Is there any way to stop it?

Perhaps not completely, but there are ways to control the problem. Owners should have a clearly defined Rules of Credit which is known to staff and customers?and they should apply them consistently.

Many owners started off with some rules but over the years they have become lax at applying them. Customers and staff have become so used to breaking them that it's as though there are no rules at all.

The minimum rules are:

  • Credit check for all new clients
  • Credit limit for all clients
  • Terms of payment 7 days, 30 days etc. Customers will have to negotiate a longer period.
  • Procedure for letters 1, 2 and 3.
  • Procedure for phone calls after letters.
  • Cash Sales only after limit is reached or deviation from payment policy.
  • Procedure for debt collection.

    It doesn't matter what the rules are, as long as your customers know them and know that you will apply them without favor.

    You may need some help from your accountant to fine-tune the procedure and help with the letters and telephone script.

    About the Author

    Kelvyn Peters CPA is one of the longest serving Tax Agents in Australia. He registered as a tax agent in 1962 and was appointed as a CPA in 1964.

    He is well-known for his ability to rescue an ailing business.

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