"Money makes the world go round"

As owners of small businesses do you subscribe to the view that if you insist on you customers paying you on time you will risk upsetting people and lose valuable business?

If so, I would like you to spare a few minutes to read these few lines, in which I seek to persuade you otherwise.

I will start by stating the obvious, with a quick run through how the system of buying and selling should work. I shall then briefly illustrate what happens when the system fails to operate, before briefly considering what can be concluded from such a breakdown.

The reason we are all in business is to supply goods or services to our customers, and to receive payment from them. That’s what makes the system function. There would not be much point in a system whereby the payment bit was omitted ….. it just doesn’t work! In the words of the old song - "Money makes the World go Round".

The system under which we all operate demands certain things of us all:

Sellers’ responsibilities include:

• Making our customers aware of what exactly we are supplying and when, and the price of same. In fairness to all parties this information should be provided in an unambiguous way at the outset of the transaction, so that there can be no misunderstanding.
• Agreeing terms of payment with our customer.
• Supplying the agreed goods or services in accordance with the agreed schedule.
• Dealing with queries or disputes in a prompt and equitable manner.
• Buyers have responsibilities as well. Prime among these are:
• Advising the supplier of any necessary changes to the order in a timely and constructive manner.
• Raising any queries arising from the transaction promptly, and working for their resolution in a positive manner.
• Paying the supplier in accordance with the agreed terms.

If a buyer has a genuine reason for not paying an invoice, for example if the wrong goods were supplied, or the goods were faulty, that is not a problem. It is up to the seller to resolve the matter expeditiously. However, if the supplier has completed his side of the contract correctly and the buyer then withholds payment, the system breaks down. If this situation persists, or is repeated in dealings with other buyers, the seller’s cash flow is adversely affected, and eventually reaches the point at which he or she can no longer trade, whilst the buyer thinks he is sitting pretty.

But is he …..

A business that does not pay its bills, or makes a practice of paying late, may have money in the bank,but will probably lose out in the long run. This is because other companies will form the judgement that it is in financial difficulties, and become reluctant to deal with it. Additionally, credit insurance companies will withdraw cover from such a business, making it even harder for it to obtain credit.

In the end, paying on time is not only a matter of ethics, but is also good common sense. If we all pay one another on time the money circulates between buyers and sellers and we can all prosper. Recalcitrant payers are acting in an antisocial manner, and deserve to be stopped in their tracks.

So, to return to the point of this article, in cases of late payment, where you have supplied in accordance with the contract and the buyer has not kept his or her side of the bargain, there seems no reason why you should not insist on prompt payment, and in cases where payment terms are exceeded, use the weapons at your disposal to obtain recompense. This should form part of your credit management policy.

As far as fear of losing customers is concerned, in the circumstances I have described you would be better off losing the custom of people who either from practice or necessity do not pay their bills on time.

Please note that this article is not written by WiRE but by a third party company. Whilst WiRE have made every effort to ensure that the information and details are accurate, we are unable to guarantee that they completely and WiRE are therefore unable to accept liability for any loss you may suffer as a result of omission or inaccuracy.