Running a business on credit is one of the most professional things you can do, whilst also becoming one of the most risky. As soon as you offer credit to your customers you are opening yourself up for severely late payment, or worse still, no payment at all, which can be crippling for any business. For this reason it is imperative that you maintain strong credit control to minimize the risks to your business without damaging customer relations.
The first line of defense against late and non-payment of credit terms should be to restrict to whom you offer credit. By keeping tight reins over who qualifies for credit from your company, you should be able to weed out the non-payers, late-payers, and those you just can't trust for whatever reason. This way, you should only have credit offered to proven customers who have paid promptly in the past, which should limit credit problems and cash flow issues from even arising.
If you do happen to come across a customer who hasn't paid his bill on time, it is good courtesy to send a reminder letter of two first. Make sure the tone isn't too heavy - there may be a good reason for you not receiving the payment, or the customer might just be running a bit behind. Either way, it's important that you don't damage your reputation or your relationship with the customer by simply going straight in there with the legal language. In your reminder notice, politely ask for payment within seven business days, or even fourteen depending on the importance of the customer. If payment still hasn't appeared after that, it might be time to start raising the tone.
After you've sent your reminder letters, it's time to send a more strongly worded notice. This should ask for payment within five or three working days to avoid further action. If again you receive no response, you should certainly follow this up with a call, stressing the urgency of receiving payment and you intention to take further action to realize your remedy.
Finally, if this yields no results, it's time to involve the lawyers. A legal letter is very effective at converting late payments, and can be one of the best ways to avoid legal action. Of course, there are legal remedies open to you should this fail to yield the desired result, but by taking these steps first, you should hopefully be able to avoid this eventuality.
Internal Control In Business
There are many self-employed workers who have businesses that own THEM. Think of the Mom & Pop stores that chew up 12 hours a day, 7 days a week for these people. They live their whole lives behind a counter or stocking shelves, while life passes them by. Some can afford a so-called "too weak" vacation, but after it's over, it's back to the daily grind. Can you picture yourself in the same situation, if you keep going the way you are going now?
There is a difference between seeing and vision. Some people can only see what's in front of them. They can't envision a different picture of themselves, doing things in a different way. Don't allow yourself to set up a business that ends up owning YOU. Take the time to evaluate what you are doing now, and how you can grow yourself out of working for your business like just another employee. There may be some nobility in the motto "Everybody works here", but nobody will care if you extract yourself from the daily chores.
A regular review of your business will also help you to set the next goal or create the next mission for you to accomplish. Avoid becoming so comfortable with your current model of doing business that if a shake-up occurs, you'll find yourself without a plan or escape route. No business is immune from outside forces that can abruptly change things for the worse. If you're mentally prepared to set new goals and are open to new ways to do business, your mind will be better prepared to act quickly, in case of emergency.
Whether you use automation, employees, outsourcing or Virtual Assistants to take some (or all) of the workload you presently do off your shoulders, prepare yourself for giving up some control. Most entrepreneurs have a real problem with letting go of the things they built themselves. Guess what? The chores, duties and repetitive work your business requires actually take away from your ability to work ON your business. Don't fall into the trap of letting the urgent crowd out the important. Delegate work to people who are paid to deal with time-consuming tasks that need to be done - just not by you.
You may also need to decide if "drilling down" deeper into your niche or drilling a new one altogether is the way to go. Only you will be able to determine if what you are doing is truly satisfying to you, as a long-term pursuit. If you really love your niche, but can't see a way to increase your business doing what you do now, get help. Brainstorm with other people, even if they're not in your line of work. There can be some surprising insights from people who don't have your preconceived notions about how to do what you do.
Solid financial and legal counseling can prevent problems from cropping up, and minimize weaknesses and threats to your business. You may have done everything on your own to start your business, but as soon as you can afford it, get your bookkeeping, taxes and legal exposure looked at by professionals. Lawyers and accountants can be the key to you taking your business to the next level. Not having them on your team can mean real trouble, if you're doing something wrong and don't know it.
Regular reviews of your business, away from the daily tasks you may be doing, can give you a perspective on your operation that may not occur to you while you're slaving away. The time you spend looking at the big picture helps relieve the eyestrain caused by staring at a computer screen all day long, too!
Both Jonathon Hardcastle & Jo Han Mok are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.