Then they went into liquidation. Harsh lesson number 1!
- 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.