We have written many articles for Small to Medium business regarding pitfalls that could have been avoided with just a little knowledge and astute advice. This article is about something that has directly led to the demise of so many businesses who found out the hard way that accepting late payment could cripple your business!
Let’s look at the potential negative effects of your clients paying you late…
If your business doesn’t collect on payment for services rendered immediately your cash flow is affected, which then leads to you having to borrow money to cover your overheads. This can lead to a downward spiral of debt from which, if you continue to agree to, or can’t collect on, late payments, there is often no return.
As quickly as banks will loan you money if your contracts look good when cash flow worsens they can just as easily ‘ call the loan in&rsquo, and this has led many small companies to declare bankruptcy. It happens continually.
When debt is not paid it immediately it starts costing you. It is either costing you in terms of the interest you now need to start paying on loans – or the interest you are losing from the money being in an interest-bearing account in your bank.
This is more than just irritating – it always poorly reflects on any business when you may be looking for partners or investors and particularly when you may want to sell the business.
This is a big subject and your Virtual Assistant, through sourcing the right people, can better advise you, but in essence; don’t be tempted to take on large contracts which force you to accept 60 or 90 day payment terms. Insist on 30-day terms as a maximum and offer good incentives for cash or earlier payment.
If the damage has already been done, engage V –Assist, to help you collect your debts before they become unmanageable - and handle the collection of long outstanding debts through the correct debt collection procedures.
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