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Late payment of bills growing

Discussion in 'Finance & Accounting' started by Scottish Business Owner, Apr 14, 2008.

  1. stugster

    stugster Member Staff Member

    I feel this problem with home users more than business. When I'm just doing service work only, I charge on-site, but when I'm ordering hardware/computers for them, I just send an invoice to them at the completion of the work.

    Usually have to wait about 7 days, but a couple of customers are now pushing a month. Will be going round do see them soon when I'm "just passing"!
     
  2. Brian

    Brian Member

    Stuart,

    You dont seriously give people computer equipment for free? What happens if they dont pay will you go in and take the stuff back? Surely with the depreciation on this type of equipment you would lose if you had to resell anything as second hand?

    If I went to PC World I would expect to pay there and then. I'm not so sure I would be giving people the opportunity to take advantage.

    Brian IFA
     
  3. stugster

    stugster Member Staff Member

    Hi,

    Sorry Brian, I didn't make my post clear at all! I send an invoice at the start of work, and I purchase the hardware from my suppliers immediately. This usually gives them time to get the funds together to pay me when I go back with the new computer/hardware.

    7 days is a bit of an exaggeration as well, normally 4 or 5, and that's from the first visit. So it's not as bad as I made out in the previous post.
     
  4. Bummer! and there was me about to order 10 top spec pc's to be delivered to some obscure warehouse in Fife with a false name. Ah well back to the drawing board!
     
  5. Brian

    Brian Member

    Hi Stuart,

    Now that sounds better. I know said that tongue in cheek but I dont think it would take long before someone tried it on.

    Brian IFA
     
    Last edited by a moderator: Mar 19, 2018
  6. ahop23

    ahop23 Member

    But so many people expect work to be done first, and then to pay when the work is complete. Can you ask them to pay so much down and then the remainder upon completion? Is this just as dangerous or a way to gain customers?
     
  7. stugster

    stugster Member Staff Member

    I don't think payment terms are a way to gain customers to be honest, especially home users. But again, a deposit or full-payment for hardware/software is usually expected up front.

    I try and balance the risk with the customer service, it usually pays off:)
     
  8. Sid

    Sid Member

    Late payments has been a problem in the UK for many years now - it is not new

    The FSB has tried many times to introduce legislation to force 'on time payments' but what does that mean ? It is recognized that a reasonable period of credit is 30 days (from the average number of days in a month) but there are lots of reasons that can be put forward for a Customer not being able to meet that allowed time

    The accounting profession has adopted a principle that delaying payments for as long as you can has a positive affect on cash flow. This arose during the early '80s when interest rates were very high and the major accounting firms were telling everyone to run their businesses on as much 'free cash' as they could - in other words finance their operation by their suppliers. That principle has stuck

    SMEs are generally afraid to push for their money and will have to wait until their invoices are included in the monthly 'cheque run' if ever. The larger Companies will only pay what they have to, for critical supplies and the 'squeaky wheels' and it is there that the trouble starts in the whole cash flow chain

    We recommend our clients to get with the accounts people right at the beginning of a relationship with a Customer and get to understand their method of dealing with their payables. That way they can agree to payments terms that invariably will be met. This might mean extending credit for as much as 60 days but with an understanding of how the Customer's system works a more reasonable period can generally be agreed

    We also recommend that our clients invoices contain a 'Please by' date instead of the meaningless '30 days nett' and where a Customer can only pay on a statement we have them head their invoices as 'Invoice & Statement'

    IIn Europe there are many members whose normal terms allow for an attractive discount for early payment (within the 30 day limit) and some even have laws that provide for a supplier to apply to have a Customer's bank account frozen until they receive payment. There are not many late payers out there !!

    Without a law to force people to pay their bills on time we in the UK are stuck with how the accountants see the application of money. Collecting your receivables is the major part of your cash flow planning and unless you get that right you are dead in the shark infested waters of doing business. Remember there are good Customers that you want to develop your business with and there are bad Customers that will, inevitably, put you out of business. Recognize and dump the bad ones quickly

    Sid Wales
    Do Your Own Accounts
     
    Last edited by a moderator: Mar 19, 2018
  9. As Sid says, late payment was very much part of the culture back in the 80's. It wasn't untypical to wait three to six months to get paid on an invoice.

    I had a business partner about 20 years ago who was basically bankrupted by late payers.

    There was one in particular, a builder, based in Argyll who had given my mate a relatively huge contract. To meet the contract he had to put something like
     
  10. Brian

    Brian Member

    It's a pretty difficult predicament for smaller businesses to be in. Do they use the late payment legislation to charge interest etc and risk losing the business or just grin and bear it and slowly run out of cash!

    Recent statistics are showing that people aren't using this legislation as they fear losing customers. Sid makes some very good points about making your terms of payment very clear etc.

    Brian IFA
     
  11. I take the 'grumpy old git' angle on this one.... And remind all and sundry of the lyrics of that well known folk song, "The Wild Rover"......

    "I asked her for credit and she answered me nay!

    Saying custom like yours I can get any day"
    :p
     
  12. LOL! very apt Matt and well put.

    Part of my remit with businesses I work with at present is their credit control. When I get to asking people why money hasn't been collected or telephoning people asking for money I always remind them that we're not a bank or a charity to that matter!

    On another note though many businesses wouldn't get business if they didn't offer credit to customers, sometimes you have to take some risks but as long as they are managed properly it can work in your favour.

    I'm under no illusions that things will probably get worse which is why I would ask everyone to focus on their cash and get it in the bank, it's the only way to ensure survival.

    Cash IS KING :)
     
  13. stugster

    stugster Member Staff Member

    Great point!

    This money you have in customers' pockets, or sitting in the office which isn't in the bank is NOT earning you interest!

    Some banks (for example Abbey) offer a Reserve Account with very nice interest rates. If your cash is NOT tied up on other projects, why is it not in an account making your business - and essentially YOU - more money? :D
     
    Last edited by a moderator: Mar 19, 2018
  14. Some clients are really taking the mickey just now....with regards to late payments....I do appreciate they are waiting to be paid too....

    So everyone is becoming the same....

    Gordon
     
  15. promostamper

    promostamper Member

    i lived in belgium for 14 years and heard of many people who had not paid bills having their accounts frozen until the debt was paid.

    If doing something for one of the neighbours that is not sold on my online store i always send them a quote the next day and request 50% payment upfront and they will receive a 5% discount on final receipt of invoice if paid within 2 working days and have found this works quite well
     
  16. Hmmm; must admit. I've three on the boil at the moment and that's VERY unusual for me. One guy is fair enough; he's been screwed over himself by a local council and is paying me bit by bit. But the other two are just at it and will shortly wind up in court by the looks of it.... :mad:

    Sigh; it's just like the good ol' days of 1988....:(
     
  17. Adventurelife

    Adventurelife Member

    I am lucky that around 85% of my business is paid upfront or at time of delivery. However , of those that do have credit terms I have seen a sharp increase in them extending the time to payment. To my huge disappointment this has include local councils/education departments ie government money.

    We are currently all over it like a rash at present with the task of getting commitment dates of payment on each and every call.. We have managed to reduce the outstanding of over 30 days by 75% over the last 3 weeks. Next year I have a KPI of 90% paid up front. I used to run a business in Dublin and also one in Belfast and if you think late payment is an issue you should try Dublin! It was not unusual to have someone walk into the office with a bag full of cash ranging from £25k to stupid amounts in settlements that had been outstanding a year.

    Just today I did a pre quote prior to a full quote due to the payment terms I was after for a job in 2009. I asked for 50% upfront and the rest 10 days before delivery. I did explain the reasons and how much I would lose if there was a cancellation or the numbers involved reduced. I fully expected to be told to jump from a high height but to my amazement they have accepted the terms as long as we agree on the services to be delivered. This is our potential biggest deal ever over a 3 day period we can earn 2 months income but I was not prepared to do it unless the payment terms were in our favour as I judge the risk as to high.

    On a payment side I have changed my own payments to suppliers to 7 days. I think in these times you can build a lot of friends by paying quickly. You never know when you may need a bit of help.
     
  18. promostamper

    promostamper Member

    i have always paid my suppliers within 5 working days - unless i am abroad then it is about a week later than the 5 working days - makes me nervous if it builds up what i have to pay
     
  19. I think Adventurelife is in a very unique position of being paid for most bookings upfront. I dont think i'd be recommending that to businesses who operate with credit terms. I think it's important that you balance paying people with getting paid. Businesses do go bust that are highly profitable purely because they run out of cash.

    It's a vicous circle because if people dont pay you in time you cant pay your suppliers. This is happening just now and it's a very difficult cycle to break. Smaller businesses need to be a bit more assertive in collecting cash and stop being a bank to the big boys.