Even if you have the world’s greatest products or services, and even if you have the world’s greatest business model, your business will never succeed or be profitable if it doesn’t get paid for what it sells.
A recent survey by the Association of Business Recovery Professionals shows that late payment is a major factor in one in five business failures.
According to another recent survey, this time from Satago, a credit management company, some 32% of small businesses are reluctant to chase slow payers. Of those, four out of five say they find the process of chasing debts “uncomfortable” whilst the rest are afraid of upsetting their customers. Three quarters of small firms have no process in place for chasing debtors, and no person specifically responsible for doing so.
Late payment or, even worse, non-payment is a threat which businesses need to take very seriously if they wish to avoid business insolvency. There is no doubt that it can bring companies down. Very often, the failure of one business can lead to financial problems for others, so that there may be a knock-on effect.
So make sure that you sell to people who not only can, but will pay. Good credit control starts even before you make the first sale. Know who your customer is – are you dealing with a sole trader, a partnership, a limited company? Carry out credit checks as far as you can, even for existing, longstanding customers. Set credit limits – and stick to them.
Understand your “good” customers – those who pay regularly and on time – and which are your “bad” customers – invariably late payers, who query everything and regularly break promises. Ask yourself whether you actually want to do business with them. Be suspicious of round sum payments on account, or payments which don’t easily reconcile with sales ledger entries.
Collecting debts is key at the best of times. It can be the difference between survival and failure of your business.
If you need any form of corporate recovery advice or you would like insolvency advice then do not hesitate to contact us here at tri group today.