Red-top reminders causing cash squeeze [BT broadband office]

Red-top reminders causing cash squeeze

Posted 17 April 2008 at 8:40AM by Hannah Gilchrist in Investment and finance

Dreading the day the next bill reminder drops through the letterbox? Or do you just grab the whole lot and throw them in the bin?

Sure we all know that paying your bills on time and a bit of financial planning makes for a stress-free life and can even cut money off your next bill, but in this struggling economic climate should businesses be given extra leeway to delay invoices just to keep them afloat?

Ok so everyone in business has experienced that vicious circle where you're waiting to be paid by a customer just so you can pay your supplier. However some larger businesses are now holding out for the red reminders as a way of slowing down the cash-flow process, forcing the smaller firms to wait in limbo until the invoice is paid.

But if, as research suggests, 10 per cent of small business collapses are triggered by late or non-payment of bills can companies really start altering their payment schemes just to suit them? Is it a case of give someone an inch and they'll run a mile?

Tags: bt, bt broadbandoffice, controlling costs

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Comments

1. At April 17, 2008 3:06 PM, OldWolf wrote:

I think that it is slightly ironic, as I remember something from a long time ago that me ex told me about.

She worked for 150, and it turned out that when people would continually wait till the red reminder then all that would happen is that it would get sent out earlier.

Sneaky eh?

2. At April 17, 2008 3:25 PM, Lesley Muirhead wrote:

This article is so true of larger companies, we are a small trying to grow business and are struggling as the bigger companies we deal woth are not paying for 60-90 days at times, being a small business we need our invoices to be paid within 30days so we can stay afloat. They should'nt be able to suit themselves as we can't.

3. At April 17, 2008 5:48 PM, Lizzy wrote:

As someone who has recently started my own business. I agree that lenghly payment terms can cause concern.

I think though that rather then taking a negative stance ie "our clients have 60/90 day payment terms and this does not work for us" you make it work by advising them of the terms you require and control the situation or select smaller clients in the early stages, who work on a similer cycle. If the terms dont work for you, try and find clients with terms that do. Getting business is key, but sometimes it can be the wrong type of business because your time goes into work that will not be paid for considerable periods of time, leaving gaps in your cashflow.

Sometimes you can suggest something that is in their benefit that will in turn, afford them a little flexability on the invoice timescales.

From a business security perspective, I would consider it to be one of the most stressful aspects of the job, which is why I think it is imperative to have positive protective measures in place.

There is a number of things that can be done upfront,to minimise the risk and plan your own cashflow. This includes penalty clauses in your terms. Should clients fail to pay on time, and for example have recevied a discount, then the reduction becomes nil and void and the full amount applies should the payment date be missed- you will be suprised how many clients pay on time when they are reminded that this will be imposed!!

Dependent on the nature of your business, there will always be a risk with new first time customers, as you have no history of payment and cannot gage reliability.

Repeat business and retained clients, through a quality driven service is a good way to establish steady income. I think its important to be selective about clients in the early days. Try to build up a reliable payment history. It also pays to develop rapport with your point of contact. If for any reason there is a delay in payment, having a good relationship with your point of contact, makes the world of difference. They are more likley to go out of their way to assist in resolving the matter on your behalf.

Invoiceing, payment processes etc are impersonal, and there are bound to be delays. Good client relationships are business critical.

4. At April 17, 2008 9:49 PM, J G Dawson wrote:

Too many companies in Britain today are run by the seat of their pants, have little cash and should be treated with extreme caution - Watch out for things like over-ordering - a sure sign they may be planning to go bust - Cash upfront is the real answer and please don't tell me it can't be done - because it can - all it takes is bottle and bit of nous...

5. At April 18, 2008 6:47 PM, Clare Almond wrote:

Part of the solution is to have a decent profit margin built in - something small new companies often neglect. Take small clients - they usually pay the best and try to be in a business where there is either repeat or continuing business. Another tip, if you can, is always to buy online and pay up front that way you do not have a massive creditors list. I do not have a landline or fax as I do everything online including banking (no charges!) so the only things I have to think about are my rent, mobile and software lease (all standing orders). As far as my clients (debtors) go I maintain a close and cordial personal interface with them all. In the 3 months since starting up I have a cash rich company with a sufficient cushion for real emergencies. And, yes, I pay my sub-contractors on time too!

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