Nearly every business will struggle with cash flow problems at some point or another. The challenge is when your client's cash flow struggles affect your business' cash flow. You do have options to deal with slow-paying clients including collections, writing off their accounts, or even firing them as a client. If you're stuck trying to decide what to do next, have you considered how late paying clients put your business at risk?
When online retailer Amazon recently purchased the grocer Whole Foods, CEO John Mackey compared their relationship to dating and falling in love. Destiny reigns when one business has what the other business needs and the sales process feels "meant to be". Inside of a business relationship, however, there are situations and discussions that could be challenging but must be addressed.
Instead of avoiding tough conversations with your business customers, follow these rules.
How often do you call a business and find yourself stuck after "press 1" for this and "press 8" for that? Technology can be a wonderful resource but are businesses ready to rely on fully digital systems? A recent USA Today article highlighted new technology and stated that some debt collections could be handled without human interaction. When your business relationships are at stake, we beg to differ.
Statistics show that it costs five times more to attract a new customer than to keep one. Growing businesses, however, typically devote more time, money and effort to customer acquisition than retention. Even with cost of marketing, digital and traditional, and sales, new clients are still not buying as quickly or as easily as current clients.
With that in mind, let's discover some tips for keeping current clients happy and loyal.
As if starting a business isn't challenging enough, after a great idea comes the hard work of attracting clients. After attracting those clients is the task of getting them to pay invoices on time. In reality, the homework used to qualify clients may also offer clues to whether they will pay on time. While some may argue that beggars can't be choosers, we "beg" to differ.
When talking about money, the Latin playright, Plautus, is quoted as saying, "When you ask for it back again, you may find a friend made an enemy by your kindness. If you begin to press still further, either you must part with that which you have entrusted, or else you must lose that friend."
Money discussions are challenging and it's very easy to take it personally when a client owes you money but isn't paying. The truth is, collecting what is owed to you is not personal, it's necessary.
In 2012, the hashtag #GetPaidNotPlayed was trending on Twitter. The tweets were shared horror stories by contractors and small business owners who were stiffed on their invoices. In total, the amounts not paid by those adding to the hashtag totaled up to nearly $16million. The saddest part of the story is that many of these invoices would remain unpaid because businesses want to continue doing business, not deal with the frustration of chasing down a non-paying client.
A business relationship can be just like any relationship. There's courtship, similar interests, a proposal, and the big day. On the day two businesses sign an agreement, excitement abounds at the potential of the relationship to add value. Unmet expectations and unresolved differences can quickly sour this relationship potential, leaving one or both parties unwilling to uphold their end of the deal. An unpaid invoice breaks down the relationship even further, leading you to question: Is it time to fire this client? Could you have predicted the end?
Chasing down an unpaid invoice seems like a productive way to spend your time .... said no business owner, ever!
When clients don't pay, not only does the late payment affect paying your own bills, it also steals time and resources. It can be especially frustrating to realize payment is late days or weeks after it is due. Suddenly, the situation becomes an emergency. Where do you start? How long will it take?
What do you say when a client won't pay?
Business-to-business relationships are highly complex. Compared to a business selling to consumers, where there could be a multitude of consumers purchasing from the business, corporate relationships between two businesses go deeper. There are fewer customers, a much longer sales cycle and larger invoice amounts. If an invoice goes unpaid in a B2B business, the lack of cash flow greatly affects operations.
