Bad paying customers
Discussion
This annoys me.
In the first couple of years of my current business (many years ago) we ratched up a huge amount of bad debt - eg people owing us money. We could never get the money in, so in the third year I changed the game plan. Quite simply, unless you were a good client (and one of the larger clients) to get anyone in my company to lift a finger you had to pay us in advance. Once we had the money - we did the job. Bad debt reduced from tens of thousands in the previous two years to £230 or so in the third year. Job done.
But one customer we let pay on invoice. They always paid late (months late) and we occasionally chased them. They even had the gaul to ask us to write a trade reference to say they were a good payer. But because they were nice people to deal with and we always got our money (eventually) we gave them a reference. (It was a very carefully worded reference mind you).
This was many years ago. In subsequent years they have been equally as bad at paying if not worse. Its not like they are short of money either. Definitely multi-millionaires.
But yesterday someone in my company finally lost there good humour and refused to lift a finger pointing out that an outstanding invoice was 6 months old. They then recounted the log of how many times we had chased them for payment. The MD then claimed that he had heard nothing about this - so the communications log to his private email address was then replayed to him regarding this outstanding amount.
We refused to lift a finger until the outstanding invoice was paid and the amount that needed to be paid on this particular job was paid in advance like any other customer would.
And for some reasons - we are getting called the bad guys on this!
Grrrr...
In the first couple of years of my current business (many years ago) we ratched up a huge amount of bad debt - eg people owing us money. We could never get the money in, so in the third year I changed the game plan. Quite simply, unless you were a good client (and one of the larger clients) to get anyone in my company to lift a finger you had to pay us in advance. Once we had the money - we did the job. Bad debt reduced from tens of thousands in the previous two years to £230 or so in the third year. Job done.
But one customer we let pay on invoice. They always paid late (months late) and we occasionally chased them. They even had the gaul to ask us to write a trade reference to say they were a good payer. But because they were nice people to deal with and we always got our money (eventually) we gave them a reference. (It was a very carefully worded reference mind you).
This was many years ago. In subsequent years they have been equally as bad at paying if not worse. Its not like they are short of money either. Definitely multi-millionaires.
But yesterday someone in my company finally lost there good humour and refused to lift a finger pointing out that an outstanding invoice was 6 months old. They then recounted the log of how many times we had chased them for payment. The MD then claimed that he had heard nothing about this - so the communications log to his private email address was then replayed to him regarding this outstanding amount.
We refused to lift a finger until the outstanding invoice was paid and the amount that needed to be paid on this particular job was paid in advance like any other customer would.
And for some reasons - we are getting called the bad guys on this!
Grrrr...
tinman0 said:If you changed a long-established precedent without warning then it's quite likely you have put some noses out of joint.
And for some reasons - we are getting called the bad guys on this!
Perhaps if you had sent written notification that all future work would be subject to payment in advance, stating the reasons for it, then your client might have seen your actions as reasonable.
It is a huge problem with British business as it is endemic. Many years ago I was attended a business seminar where the lead speaker told us all to delay payment as long as possible as everyone else would do it.
My company often waited months and in some cases over a year to be paid. The worst offenders were often the big corporations and blue chips. Get your invoice in at the wrong time of their payment cylce and you could end up waiting the best part of six months...
One of the worst offenders was a huge company that makes breakfast cereals IIRC.
I have always made it a policy never to start any work until I have received a proportion of the fee.
What line of business are you in?
My company often waited months and in some cases over a year to be paid. The worst offenders were often the big corporations and blue chips. Get your invoice in at the wrong time of their payment cylce and you could end up waiting the best part of six months...
One of the worst offenders was a huge company that makes breakfast cereals IIRC.
I have always made it a policy never to start any work until I have received a proportion of the fee.
What line of business are you in?
JonRB said:
And for some reasons - we are getting called the bad guys on this!
Perhaps if you had sent written notification that all future work would be subject to payment in advance, stating the reasons for it, then your client might have seen your actions as reasonable.
they "have not seen" any of our communications it seems. all 7 of them. its a bit like hearing "cheque's in the post". yeah right.
Just remember, it's a business, not a charity. Businesses go bust because of a lack of cash flow.
If this company that owes you money doesn't like it they can always go and find somebody else who doesn't chase them in the way you have, but then again they may find that they just get taken to court.
If this company that owes you money doesn't like it they can always go and find somebody else who doesn't chase them in the way you have, but then again they may find that they just get taken to court.
Is it any wonder that even High Street banks are now offering a factoring and discounting service?
eg. www.lloydstsb-factoring.co.uk
eg. www.lloydstsb-factoring.co.uk
GavinPearson said:
Just remember, it's a business, not a charity. Businesses go bust because of a lack of cash flow.
If this company that owes you money doesn't like it they can always go and find somebody else who doesn't chase them in the way you have, but then again they may find that they just get taken to court.
Cashflow is king.
Whats the point of doing work for nothing or getting paid months later.
If you cannot agree payment terms with a client think carefully about your dealings with them, especially if they are one of your larger clients.
I have seen many companies fail due to an inability to recognise the importance of collecting money promptly.
If you are managing your debtors correctly you will also reduce the risk of a nasty surprise if one of them goes pop - chase them on time, every time.
As an aside, many large companies actually make additional profit by delaying payments. They put the money on deposit and collect interest on it. It often forms part of their cashflow planning !
>> Edited by Egbert Nobacon on Thursday 5th January 13:17
When i had my flower shop we had quite a few account customers,the biggest companies always took the longest time to pay,the longest was I*M and they took months,but i heard it was their Co policy.
When i took on accounts for the next business i started i had a time limit clause for payment right from the start known to the customer ,it worked well except for the local council contracts who have their own times but were very punctual and didnt argue the toss once pricing had been set,so i could deal with that.
If ever anyone went over time with their payments i would ring them personally to enquire about it and suggest i was doing some cheque pick ups and i would drop in personally to pick up the payment,it worked well.
Dealing with flowers and money when buying on the markets taught me a little about paying ethics,its all sparkling clear and up front,with nothing to be shy about.
The way i like it.
When i took on accounts for the next business i started i had a time limit clause for payment right from the start known to the customer ,it worked well except for the local council contracts who have their own times but were very punctual and didnt argue the toss once pricing had been set,so i could deal with that.
If ever anyone went over time with their payments i would ring them personally to enquire about it and suggest i was doing some cheque pick ups and i would drop in personally to pick up the payment,it worked well.
Dealing with flowers and money when buying on the markets taught me a little about paying ethics,its all sparkling clear and up front,with nothing to be shy about.
The way i like it.
We direct debit all of our clients. It's in the contract. They give their bank information as part of the signup process and it's invoice on the 1st - direct debit on the 10th.
Late payments? Been there, done that, got the T-shirt. There are other ways of being nice to your clients without letting them hold on to your money interest free.
ErnestM
Late payments? Been there, done that, got the T-shirt. There are other ways of being nice to your clients without letting them hold on to your money interest free.
ErnestM
I ran a campaign for a client on late payments a couple of years ago - the website is still up: www.bacs.co.uk/BPSL/paymedirect/
I know from experience that it's pretty much near-impossible to charge interest on overdue payments, despite the legal provisions. However, as daft as it may seem a freelance friend of mine actually offersa 5% discount for anyone that pays on time and electronically and that seems to work for him!
I know from experience that it's pretty much near-impossible to charge interest on overdue payments, despite the legal provisions. However, as daft as it may seem a freelance friend of mine actually offersa 5% discount for anyone that pays on time and electronically and that seems to work for him!
There are a few basic ways of managing a purchase ledger:
1. The pay everything that is due system.
2. The who shouts the loudest gets paid system.
3. A mixture of 1 and 2 depending on the supplier.
I am happy to say that my company operates strictly on the pay everything that is due system.
1. The pay everything that is due system.
2. The who shouts the loudest gets paid system.
3. A mixture of 1 and 2 depending on the supplier.
I am happy to say that my company operates strictly on the pay everything that is due system.
plasticpig said:
There are a few basic ways of managing a purchase ledger:
1. The pay everything that is due system.
2. The who shouts the loudest gets paid system.
3. A mixture of 1 and 2 depending on the supplier.
I am happy to say that my company operates strictly on the pay everything that is due system.
I tend to pay all invoices as soon as I get them. I dont want a false cashflow and nor do I like owing anyone any money.
What amazes me is the effort people go to to delay payment and the work they generate for themselves in the process.
I had a large garage ring me up the other day asking for me to send them a statement, because they only pay on statements. They owe me the princely sum of £12 and rather than just pay it they put it into a different pile and then rang me to ask for more paperwork in order to release payment. How daft is that?
I had a large garage ring me up the other day asking for me to send them a statement, because they only pay on statements. They owe me the princely sum of £12 and rather than just pay it they put it into a different pile and then rang me to ask for more paperwork in order to release payment. How daft is that?
tinman0 said:
...unless you were a good client (and one of the larger clients) to get anyone in my company to lift a finger you had to pay us in advance. Once we had the money - we did the job...
I would be surprised if you ever attracted new clients with that attitude!
I never pay for anything up front!! I state on my invoices "payment within 30 days" Most people accept these terms.
PetrolTed said:
Has anyone any experience of setting up Direct Debits? What sort of volume of transactions do you need to make it viable/sensible?
Everything you need to know...
www.bacs.co.uk/BPSL/directdebit/businesses/
gtr-gaz said:
...unless you were a good client (and one of the larger clients) to get anyone in my company to lift a finger you had to pay us in advance. Once we had the money - we did the job...
I would be surprised if you ever attracted new clients with that attitude!
We have to lay out cash to our suppliers everytime a customer makes a purchase. It doesn't take very long for bad debt to overwhelm your margin. Quite simply - we offer the same terms our suppliers offer us, and just like the rest of my industry does. The other sums of money are just too small to wait for invoices to be paid. We'd spend the margin simply phoning customers up chasing for cash.
The idea that you can send an invoice and wait for it to be paid in my particular industry finished many years ago when the industry average had bad debt levels at 40% of their turnover. It didn't take long for the industry to change the way it worked.
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