Since the crash it’s shocking to read about the late payments culture among the larger businesses and institutions who refuse to pay small firms on time. Companies and institutions preach the importance of small businesses as job creators but their accounting policies and departments don’t support this approach.
What is your experience with late payments by larger companies? How long do you wait for payment when your small business has delivered products and services in good faith? What are you doing about late payments before they crush the lifeblood from your small business?
For small businesses who receive immediate cash payments for their products and services late payments are not an issue. But for any other small business who extends credit to their customers, late payments can be more than an inconvenience … it is a threat to the survival of their small business.
The Sunday Independent in Ireland reported that thousands of small businesses are being “crudely squeezed” by the country’s top universities and colleges. They are failing to pay small businesses on time in breach of their own rules. Despite Ireland’s universities being required by the government to pay suppliers within 15 days, one of the seven universities surveyed had only made 33% of payments within the period.
One can’t understand whether practices like this all over the world are part of punishing small businesses because they are easy targets compared to giant corporations. Are these small businesses being unfairly treated because of a deliberate policy by big corporations and government institutions or is it simply because these entities allow the payments of small business to get bungled in red tape and bureaucracy?
It’s difficult when your small business relies on the custom of these large bullies staffed with accounting and finance bean counters who know every trick in the book to delay your payment so that their cash flow is unharmed. What can you do about it? One easy way is to ensure effective and professional debt collection. Another: small businesses must invoice correctly and on time and proactively chase their payments. If you don’t have a formal process in place for securing late payments, you will simply fall into the hands of those who are ready to exploit you.
Some small businesses try to insist on either 50% deposit upfront or the full fee before they deliver product or commence with servicing the client. You might be able to negotiate such payment terms with a minority of companies but don’t be surprised if they shut the door in your face.
More sophisticated ways are of dealing with late payments can be introduced in your small business but you still need to have a good idea of the larger companies’ credit history and performance before you supply them with products and services. Ultimately, the best advice that one can offer is that if your small business is offering customers trade credit in these tight times, you need to have a formal process in place so that you can put pressure on late paying customers.