Don’t tolerate late payments
Don’t tolerate late payments
“Don’t tolerate it.” Why managing late payments is crucial for a healthy cash flow for SMEs and start-ups, says Anthony Igra, debt specialist.
“One thing I see time and time again is the huge impact denied payments can have not only on my clients’ cash flow, but on their personal lives. Many are small to medium sized businesses and sole traders and the impact of non-payment is far-reaching. There are countless sleepless nights worrying about how to pay wages, suppliers and bills and keep their businesses and families afloat while their clients hold onto the money. Whatever industry you are in, my message is clear; ‘Don’t put up with it.’”
- Set Your Terms – be clear about your payment terms at the outset and ensure it is across your contracts and invoices. You also have to walk the talk. Make the terms real in your client’s mind by acting in accordance with them. Verbalise it too so your client knows exactly where they stand. Nothing is more common than terms that are ignored by both parties.
- Be bold – if you’ve given a reasonable period of grace and they haven’t responded to your prompts then issue a letter of demand. State that this is the first and final notice and after this if no payment is received, advise them you will escalate it. In many instances, this will be enough of a ‘wake-up’ call to stir them into paying you.
- Keep your cool – it can sometimes be challenging to wear the two hats of ‘business owner’ (keeping the client happy) and accountant (asking for money) but if you are going to run a successful business you have to just accept it and deal with it. If you’ve done the work, you deserve to get paid for it so make this part of your mindset to make handling debt recovery easier.
- Systems – in any business, it’s really important to have systems in place to manage everything you do, from keeping a track of time spent, tasks, results and accounting. This means you can easily provide documented evidence that you have done your job. This is valuable if you have clients refusing to pay because they say you haven’t done the work. Then, if you do have to escalate it to a third party, it makes it so much easier to make a case.
- Escalation – This is the key. Nothing happens until you escalate, and debtors always assume you’ll never do it. This means making a statement of claim in court, or making an application to a tribunal, or engaging a debt collector, or seeking formal mediation. It means moving the dispute into an arena where a third party will decide it. This puts the pressure on your debtor to pay up. But it is the crucial step most business owners never take.
- Stop work – if you have tried everything and still haven’t been paid, then there is no point spending more time working for nothing. All this does is damage your cash flow. Don’t worry about losing the business – it’s not worth having if it doesn’t pay you and any client who has made a genuine mistake will soon rectify it if they value your work.
- Seek help – if you have tried all of the above and you still haven’t been paid, then get expert help. You can enlist the help of a lawyer or go through alternative dispute resolution via a mediator. The Australian Small Business and Family Enterprise Ombudsman offers a low-cost mediation service for small businesses disputes and has a 90 per cent success rate. You can call them on 1300 650 460 to find the contact details of the Small Business Commissioner in your state.
Last year, Anthony Igra and his team at Contractors Debt Recovery recovered more than $6 million in monies and over $62 million to date owed to small businesses, enabling his clients to pay wages, bills and keep on trading. For further information, visit: www.contractorsdebtrecovery.com.au; call: 1300 669 075.
The opinions expressed in this content are those of the author shown, and do not necessarily represent those of No More Practice or its related entities. This information is general in nature and does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. To view our full terms and conditions, click here.