The printing industry has more than its fair share of bad debtors – customers who, when the job is done, either pay late or not at all. A recent ProPrint poll found that 25% of businesses averaged between 61 and 90 debtor days – not an enviable statistic.
While it’s a vital part of good cashflow management, chasing late payments is not something that most business owners enjoy. What can you do to get your clients to pay on time? And what can you do when you’re stuck with a customer who won’t settle their debt?
Prevention is cure
The first way to get customers to pay on time, every time, is to avoid those who don’t. This isn’t easy. Chronically late and non-paying customers don’t declare themselves up front. Some businesses ask new clients for trade references, but poor payers never give the details of companies they haven’t paid.
It is better to investigate the credit record of all new customers. Perform an ASIC search for the company’s particulars and then do a credit history check with
an agency like CreditorWatch, Dun & Bradstreet or Veda Advantage. Depending on what you find, you can make an informed decision about whether to deal with the customer, deal with them on more stringent terms, or not deal with them at all.
Set expectations
Credit is a privilege, not a right. If you want to change your customer’s paying habits, you need to have ways to do it. Make sure that you have written policies in place that govern how credit is extended, on what terms, and what happens once it’s overdue.
Get your customers to complete an account application where these are outlined. That way, they’ll understand where you’re coming from once you start chasing outstanding debts and can’t say that they didn’t know.
Be active
For unpaid accounts, send reminders at 30 and 45 days overdue (or whenever is appropriate). These help to remind clients of their obligations and show that you take debt seriously – more seriously, for example, than other, less vocal companies whose debts your client might put off to pay you. Chasing can be done by letter or telephone – even by visiting in person if it’s worth your time.
After a set period – say 90 days overdue – send a final notice informing your customer that the debt must be paid immediately to avoid legal action and the registering of a default.
Last resorts
When a customer won’t pay, try to understand why. Do they have a cashflow problem? Are they close to collapse?
If they agree, ask them to pay in instalments. If they say that your work didn’t meet their expectations, try to discuss any issues in good faith. You may be able to offer compensation or a discount, which – while not ideal – will at least allow you to recover something.
Debt collectors and defaults
Debt collectors do nothing you couldn’t do yourself, but they are more practiced. They usually work for a percentage of the money they recover. Keep in mind that they have no special legal powers, and can damage your brand if they’re overzealous. Reporting a default after 90 days non-payment is also a good move, if only because the threat of such action can often compel
a customer to pay.
New services like CreditorWatch allow SMEs to share information on business defaults while putting a logo on their invoices to encourage on-time payment.
Finally, there’s legal action, which is costly and time-consuming. Most jurisdictions have a small claims court or tribunal. This is usually the best place to start. In all cases, be sure to get legal advice.
Colin Porter is the founder of CreditorWatch, an online community of businesses who share information about bad debtors to make better credit decisions
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