I have a new blog! You can read it on the Wotzon website. Here is the first entry:
Cashslow:
I’m normally a pretty understanding person. I always give people the benefit of the doubt, and am actually usually too lenient, even for my own good. Well, last week I got an email that just ticked me right off. So much that I probably mumbled some much ruder words than those when I first got it…
It was from a client of my web-design business who was behind on their invoice by a few weeks. I had sent my usual polite ‘reminder’ email, asking when the payment could be expected, and received this in return: “I’ll be able to pay half at the end of the month, sorry.” Seriously! No real apology, no reference as to when the other half would possibly arrive…
Anyway, I am relating this story for a reason. People often ask me what could be done to assist small businesses, and there are plenty of great suggestions. But none as obvious as: just pay them on time!
Cashflow is an issue, even for big businesses. Various business-assistance resources quote cashflow as one of the main reasons for business failure – in fact, 70% of businesses fail in their first year due to cashflow problems. That’s an overwhelming statistic!
All sorts of advice is offered to rectify this – strengthen every part of your supply chain, have a shorter list of debtors/creditors, don’t hold too much stock, implement progress payments etc etc, but at the end of the day, what if your clients, who you’ve done work for, just aren’t paying up? Debt collectors are ugly and cost money, and a really good penalty scheme is hard to set up and enforce.
Smaller companies may be trying to manage their own cashflow by stretching out the payment of their own invoices by just a few more days, a few more weeks. But larger companies are not innocent either, surveys done in the US show that the average amount of time taken by large companies to make a payment on an invoice is 60 days. That’s two months! To a smaller fish, that’s two months of overheads (which wont wait..) and two months of frustration, leading to hesitation to ever enter into a similar contract ever again.
Besides smaller companies going under, this lack of confidence is an issue too. If every service provider expects progress payments up front and ironclad contracts before work begins… well I’m no economist but I’m thinking this will slow things down. For everyone except the lawyers!
So if you owe money to local providers, big or small, why not pay them a bit earlier this month. Do your part to ensure they (we!) stay in business, and help maintain the trust that the marketplace needs to thrive.
Got your own late-payment horror stories, or advice on how to beat future ones? Leave a comment and let me know! (and I’ll let you know how I get on with my late-payment pal…)
