Business Cashflow Nightmares Solved Within 10 Days

Here's How To Cash In On A Vital Asset You're Just Too Scared To Touch

I've been in this place. It's called catch 22. You're owed a ton of cash, but because you value the relationship with the client, you're just too scared to chase hard.

And when you're desperate you don't think straight.

And there's the opposite type of person. They chase too hard - this isn't for those people. Just those who value their clients and just want to be paid fairly for the work they do.

Firstly, Let's Take A Look At The Trap And How You Got Into It

It's all very well collecting what you're owed.

But preventing it happening is the very best place to start. If you're making widgets, you have the raw materials to pay for. If you're selling a service, you're paying the people who deliver it in wages.

Often, you're laying out for materials and labour.

Let's start by asking a question. Pretend you're the client who owes you cash. Can they buy the same thing elsewhere?

The answer is probably yes. Perhaps even cheaper. But you add value and most of your clients appreciate that and pay you on time.

But look at the list of those who owe you. Are they buying because of your credit terms? The fact they can get away with paying you on time or at all?

It could well be that they're buying from you because they can't get credit elsewhere.

So change your conditions of trade. Insist upon prepayment from those clients from now on. And/or include clauses that allow you to charge interest or penalty charges for late payment. Get it agreed and signed.

Send them a purchase order to sign and fax back.

I Have A Wager. Will You Take It?

I bet that the list of non-payers, also includes many of the clients that make your life miserable. When they order, they want instant delivery. Faster than the competition delivers.

They shout. They upset you and your colleagues. They complain without a valid complaint. In some cases they lie. They pick holes in everything you do. Anything they can to delay or avoid paying.

They are like schoolyard bullies. They question your prices. They insist upon discount even when their business volume is low.

In fact, they cost you more to service than they make you.

Am I right? Did I win the bet?

Then There's The Clients On Your List That You Like

Not everyone on your list is a loss-making bully. It will contain clients that pay your rate. They don't complain. In fact you like them. You value them. They're like friends.

For Those Who Know Me, Here's The Simple Answer

I used to complicate everything in business. So much so that I often got caught staring into the headlights of the oncoming juggernaught. Frozen into inaction.

For the regulars to this blog, you'll know that I've changed. I prefer to simplify stuff. And this is no exception.

Take your list of non-payers and split them in two. Get a red pen and a green pen.

Bullys = Red

Friends = Green

And get ticking the names on the list.

I bet you can do this in your head? The names spring to mind. Why? Because you need that cash! That list keeps you awake at night.

Getting The Cash Rolling Within 10 Days

Your business isn't a charity. Even if you do without pay yourself, you have bills to pay. Perhaps even staff wages which rely on this cash.

Staring at the oncoming juggernaught isn't an option.

I'll shorten the next bit. Sue the reds. Don't think about their future business or relationship with you. If they value what you do, they should respect your rules.

You have nothing to lose and everything to gain. You gain the cash they owe you. If they don't come back and buy, so what?

Is it really worth the drain on you and your colleagues? The negative virus they spread whenever anyone takes a call from them? The answer is no.

Get a lawyer. Get them to send a letter or go straight for court action if you've already wasted time, energy and therefore money on chasing them for a while anyway.

If they really are bullies, they will cave in and pay. They may whimper or scream again at you. If they do, refer them to your lawyer. Don't waste any more time or energy on them.

Very often, within days of the first legal approach you will be paid up to date.

Now Your Friends

Their reasons for late payment may be wide and varied. They may be having cash-flow problems themselves? They may be just disorganised?

Either way, don't sue them. You value them. You need them.

They just need a little education. Perhaps a short email:

"Sue,

This is really embarassing. I really value your business, so I struggled to find a place to start in this email to you!

You see I've noticed that you are often late paying us.

While I would love to give you extended credit terms, I'm finding it difficult dealing with late payment. Like you, I'm sure you can appreciate the effect this can have on cashflow.

If I'm paid on time, I can stay competitive on price. If I'm paid late, I have no option but to pass on the cost.

So I hope you don't mind if we start imposing a late payment surcharge. This will help us recoup the costs so we don't have to increase prices.

Of course this won't be an issue if you are able to pay on time - you'll still get the great prices and service we pride ourselves on.

I hope you can appreciate our concern at raising this with such a valued client. I just didn't want it to get any more embarassing if you were surprised by an unexpected surcharge.

Thanks for your understanding."

If you suspect though that a valued client is struggling, don't necessarily go this way. Instead, ask them for instalments on what they owe? Offer to help them get over their own challenge.

If you do, they will appreciate it.

In fact, they may be prioritising others instead of you, and the embarassment of having to admit it may make them favour paying you first above others.

That may sound harsh, but in many respects, business can be about survival of the fittest.

And Finally, What Do You Do If A "Friend" Goes Bust?

Firstly, forgive them. If they are decent people, they'll bounce back. And they'll bounce back with the benefit of hindsight. Stronger than before and in many respects a better credit risk than others.

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