Are your customers willing and able to pay you?
Updated: Aug 13, 2019
During a recent engagement I interviewed a group of the Client’s key customers regarding their willingness and ability to pay. They all agreed that the product had been delivered, they had successfully used it for the intended purpose and the invoice was properly submitted and due. I probed deeper in an attempt to understand why they had not paid. Other suppliers had been paid, there were no significant problems with the product, and they intended to purchase again. So, what was delaying the payment ?
In several instances, the relationship with the Client was so strong that the customer felt no need to “prioritize” the payment. Other vendors would not accept a delay, but my Client would “understand”. Others had a long-term business and personal relationship with the owner, making it difficult to separate the friendship from the business aspect. Others used current economic difficulties to excuse their behavior and unwillingness to manage their business and cash flow better – making my Client the “buffer” for their situation.
To resolve these past situations is difficult at best and/or a costly endeavor. Going forward, the Client understands three changes must occur in his business:
1. Every customer must be made aware that the expectation is for the Client to deliver the product or service correctly and the customer must pay timely. That expectation was not communicated effectively, and small problems became large.
2. If a customer has a financial issue, that has to be recognized and dealt with quickly. If often makes sense to help a customer during a difficult period. However, it should not change the relationship to one where you become a banker or lender. It’s better to heed the red flags early and not hope for the best, which rarely happens without effective management.
3. Almost every business is impacted by the economy. Some garner success and use it to improve their operations and become stronger. Others are dragged down and slowly lose the ability to continue. Concentrate on the controllable factors in your business – improve your internal business processes, shorten your order to cash cycle, offer early pay discounts, stay close to your customers, offer extra value, visit and call your customers more, and react quickly to changes.
Contact us and let us assist you to grow your business effectively.