Avoid Late Payments and Bad Debts

By Meredith Parker

job, jobs, career

Having good cash flow is essential for any business to achieve success; there are of course many things vital to keeping your business in the black, but providing goods or services for free is not one of them; bad debts and late payments are almost always a factor when a small business hits a cash flow crisis, so it is prudent to adopt a strategy that will mitigates the effects of non or slow payment.

To ensure payment and promptly a business has to level the playing field a little, share the financial risk with the customer, to this end it is completely acceptable to ask for something from the customer before goods or services will be provided:

• Credit checks
• Payment in advance
• A Deposit
• Third party guarantees

A credit check is essential if a business intends to extend any kind of credit terms to customers as, although not a complete guarantee, it can highlight obvious problems in advance.

Asking for payment upfront is always going to offer the most security, but the reality of modern business is that this is not always going to be a commercial option.

When very high values are involved asking for a third party guarantor may be applicable, but by far the most useful tool available to a business is the financial deposit; it is the best way of ensuring that even in the event of a bad debt the loss is not total.

The worst thing one can do in business is to treat every customer in exactly the same way, and although sentiment will not be your friend when it comes to collecting money owed to your business it is wise to consider first whether the debtor is also a valuable customer; if they have a good past payment record and bring regular custom, talk to them before getting heavy, the debt will often prove to be oversight or a temporary blip; sometimes goodwill is more valuable than prompt payment.

By Meredith Parker