I wanted to pass on the some of the experiences I have had over the past year discussing cash flow issues with many businesses. This instance relates to one of our services ‘Debt Collection’ and once again I have just come off the phone with a really nice guy, who owns a business.After our initial discussion we get on to the nitty gritty of why he calls me. He explains that Amril was recommended to him and he needs assistance on a case of late payment.
Obvious questions asked, how old is the debt and how much is owed? He replies 2 years and £19k. Wow, why have you waited so long I ask him? He’s a friend, I go to his home, we have dinner, his wife is really nice and he keeps promising payment?
It then transpires that the limited company owing the debt has now gone into liquidation. The chance of getting any funds out of the debtor reduces to about 5%, if you are lucky. I explain this to him and say I’m really sorry but you have left it far too late. I guide him on certain issues and we end the call.
Ignorance is NOT bliss!
A few years ago, a hand shake and a nod may have been all you needed to secure a deal, and saying, “but I have always done business this way” does not cut the mustard any more.
Firstly, you should be asking yourself again and again:
- Why am I in Business?
- What do I want to achieve with my business?
- Why did I start my business?
I bet it was not to lose money and have a potential business failure on your hands. So why do so many businesses insist on the importance of a relationship when the other business is not playing by the same rules. Business is two way; if one side is not forthcoming and explaining an issue they have, they are playing you and using your business as a bank.
Stupid does not cover it!
Business sees Credit Management as a cost and a burden. That is ignorance speaking, Credit Management is a saving if dealt with properly, it can increase your net worth, profit, credit rating and cash flow, after all, you went in to business to increase all four elements I mentioned not de-crease them.
Educate your clients or lose more money AND if you give credit on say 30 days, don’t wait longer than 60 days before you consider passing it to a respectable third party. After all, talk is cheap.
The biggest business failure is Cash Flow, get help and don’t think the matter will go away by itself, as a business owner you need to deal with it quickly and effectively. Whether you deal with it, or pass it over, whatever happens don’t delay.
Going back to my initial introduction, I take a look at the debtor company’s credit report, back in 2007 and then again in 2009, two CCJ’s come up totalling £10.5k. I ask the business owner “would you have done business with this company if you knew what you know now?” “NO” he answers, “I would not have done”.
A £5 Credit Report would have saved him £19k – Now where is the cost!