Get to know your customers and solve the problem of late payment
Via the results of their SME Confidence Tracker Bibby Financial Services have found that among other things a quarter of SMEs experience bad debt and about the same proportion see their profits fall as a result.
In response to the findings Bibby suggest that businesses should take the time to get to know their customers by which they mean, find out if you are about to do business with a customer that might pay their invoices late.
Know your customer
It’s slightly over cooking things to view customers as the enemy but sadly this can sometimes be not far from the reality once a large invoice is overdue by 180 days or more. While research shows that suppliers are often reluctant to engage legal council to help with the matter, the very fact it becomes and option indicates that the situation is moving towards a more adversarial stance.
It makes sense to know as much as possible about the people and organisations that will come to owe you money and there are several resources that suppliers can use. County Court Judgements (CCJs) against directors, company returns, winding up petitions to name a few. Many of these can be obtained from credit agencies.
Some agencies now also offer a traffic light system to give subscribers an “at a glance” view as to whether a potential customer is liable to pay late, green and you’re in the clear red and you’re not.
These data sources are helpful in that they give an impression of what the situation is, but they don’t give an impression of ‘why’. To illustrate the point, the traffic light system is equivalent to saying Jo Bloggs is a terrible person without explaining why.
At The Late Payment Directory we believe that context is vital. The spectre of late payment shouldn’t always be a reason for hesitating over a piece of new business. Knowing why a company has paid some of its bills late can help in determining if it has an institutionalised culture of late payment in which case one should indeed tread carefully, or if instances of late paid bills have occurred due to more understandable and unavoidable circumstances such as the absence of a PO on the invoice or the trickle down effect from upstream supply chain late payment issues.
It’s our aim to provide a platform to help deliver this vital context and give businesses the confidence to take on work from customers in situations where the circumstances may not be quite so cut and dry. To find out more click here.