Those businesses who have credit customers also need good procedures for checking the credibility of customers. We do, but on occasion you still get caught out. It is difficult for some of our customers where they may be dealing with a small number of clients, it only take one not to pay on time or in some cases not pay at all to upset the whole cash flow.
Unfortunately, all too often our customers fail or refuse to tell us the situation that they are in. This almost always results in a legal process to recover what is legally due to us.
But it doesn’t have to be like that. There are other ways around an outstanding debt. Being honest with your supplier, in most cases helps the situation, at least it’s a start. We had one customer who owed us a sum in the mid four figures, this was as a result of one of his clients not paying him and his whole cash flow snowballed. At first we took the natural action of stopping his account and following the legal process. But it initially appeared that we may not get our money and it seemed to us that there was a another way around the problem. We let him trade with us again!!! But we formed an agreement that every time he bought more timber he had to pay off a percentage of the original debt! Bingo, he is able to continue trading, we get the benefit of that trade and we get the original debt paid off. Now it wasn’t a quick thing, but it did work and that debt is now paid off.
We have used this and other methods to help our customers clear their debts. None of us like getting paid late, but it is better to eventually get paid than not get paid at all. I’m sure we are not the only business doing this, but it is a good thought, and it probably will not work with everyone, but if being more flexible fulfills a bad debt, good Oh!!!
So, Customers Credit – difficult to manage? You bet your life it is, you need a strong and attentive team to manage debt and credit, but it is manageable.