When Cedar Rose
was first established in the UK in 1997, we were very excited to have customers in different parts of the world. The first monthly invoice we sent out was to a UK company but we very quickly added clients in Spain, Greece, Italy, Ireland, China and India - most of whom are still clients today. In fact, in 2016 we have over 500 clients on Cedar Rose`s books in all corners of the globe. What we were totally unprepared for in 1997, however, were the lengthy credit terms some of our new-found clients expected. Whilst fortunately most of them have been exemplary, and paid regularly between 25-35 days, there was one of our first clients in particular who just did not pay and then asked if they could pay every three monthly invoices at a time - 30 days after the final one was received (by post from the UK to Italy!). This meant that work conducted on the 1st January, for example, would not get paid for until the middle of May. Then, the same client asked to pay every six monthly invoices at a time - and because the amounts were not huge and it was a well-known business information agency with a history of over 100 years since establishment in Italy - and we were the new kids on the block - we naively agreed. Then they went into liquidation.
Harsh lesson number 1! Even credit reference agencies can get it wrong. To be fair, we like to think we have raised the bar in credit reporting since then - for MENA countries at least. So, how have we prevented this from ever happening again over the past 18 successful years? The simple answer is - relationships.
- We learned in our first year of trading the importance of not only knowing your customer - the information which can be extracted from a simple credit report - but maintaining a relationship with them by staying in regular contact.
- Secondly we learned that it is better to turn down business than to be tied into unreasonable payment terms. The only time when such six-monthly terms would be acceptable would be when your employees, landlord, tax authorities, utility companies and suppliers are also happy to accept payment after six months - and frankly, good luck with that one!
- Thirdly, we stay aware of the warning signals. If your client is pushing for extended payment terms, ask them why. It is most likely that they are having cash flow problems and if they don't admit this to you it is time to conduct further investigations by contacting the other trade suppliers or the trade references that should be supplied in their credit report.
- Finally, you need to have the confidence in your product to know its value, and not be afraid to ask for payment. Regular reminders that payment is due/nearly due or overdue are essential and there should be no need to step beyond the realms of politeness but there are times when you may need to be very firm and perhaps put the client`s account on hold until old invoices are settled.After all, if they are not paying, it could be because they are in serious financial difficulties, so continuing to supply them will increase the risk of putting your company in the same line of dominoes.
At all times, if credit control is part of your job, remember that your company's sales people may have worked hard to build a good relationship with the client and communication with your sales team
about late payers will keep them in the picture too. They may even be able to pull strings with their contacts and get your invoices moved up the pile, so work together as a team so that all the hard work selling and producing your goods or services brings positive results for your company. After all, a sale is just a gift unless its paid for. Right?