Sorry, we’re not paying you
Along with the downright strange is the quasi-legal; “your tax file number is in the wrong format, so we can’t pay your invoice” is one of the better excuses I heard in the years of running my business.
“I gave your technician a cup of coffee while she was here, so you’ll have to give me a credit” was another great claim.
A teacher once threatened to report my business to her union on the basis we were exploiting low paid women workers. The funny thing was we’d cut her a big discount because I realised she’d struggle to pay the full rate.
Big boy excuses
The corporate sector can be just as bad, some treat their suppliers as banks who give them an interest free loan.
One multinational suffering cash flow problems decided to pay all bills after 270 days, regardless of the agreed payment terms. It didn’t bother with excuses and the accounts team was blunt – if suppliers didn’t like it, they could sue and wait five years for their money.
Don’t delay – chase
A truism with collecting debts is the longer we let them slide, the less likely it is they will be paid so we have to be on the ball in chasing those late payers.
In Xero you nominate the due date when creating the invoice and this will appear on the copy the customer receives. As soon as the due date has passed without payment, follow up with a reminder or a phone call. It’s best to talk to late payers as this shows you are serious about getting paid.
Identify problem customers
The good thing about late payments is it’s a pretty reliable guide to who is a bad customer – if they constantly pay bills late, then you don’t need them in your business life and it’s time to get rid of them.
More insidious is the good client gone bad – a previously good payer who suddenly starts making excuses could be in financial trouble. If so, it’s worthwhile making sure your business isn’t too exposed if that client suddenly goes under.
With one client the secretary insisted on paying most of our bill out of petty cash. Two weeks later the company, a Scotch whisky broking service, closed shop and left thousands of angry customers and suppliers out of pocket. It took the creditors ten years to get a fraction of their money back and the secretary did us a great favour.
Not every late payer is a bad guy though, even in the best of times good customers can hit a bad patch so making arrangements with them can be a good long term strategy.
What are the best stories you’ve heard from deadbeat customers?
Paul is a leading expert in online business and is based in Australia where he is well known as a broadcaster, speaker and author of seven books, including eBusiness, Seven Steps To Online Success. His Future of Business website looks at Internet trends like social media, cloud computing and other web technologies that are changing our industries.