Allowing customer’s time to pay is a decision that needs some careful consideration. It is easy to say that you require all payments upfront, but in practice this is much harder to do, especially if there is a chance you might lose the sale. There are advantages to offering credit to customers, it can attract new business, encourage returning customers and help build long standing relationships. But you need to understand that extending credit to anyone is a risk so when offering credit you should protect your business as best you can by following simple rules:
• Check the creditworthiness of your customers by using a credit reference agency; this will give you an insight into how their business is run.
• Take the time to get to know your customers so you can confidently say ‘I believe this customer can and will pay us on time’.
• Take up trade references wherever possible.
• Make your credit terms very clear at all stages of the sale.
After the sale there are also things you can do that can ensure you get paid on time: • Issue your invoice as soon as the job is complete.
• Send a statement to your customer before your payment is due.
• Telephone your customer in advance to ensure your payment is being processed, this will also ensure you have time to deal with any problems that might arise.
The better payment practice works both ways, to build good relationships with your suppliers you should make sure that you pay them on time. If you find that you can’t pay your suppliers on time for any reason then you should speak to them before the payment is due and explain your situation. If you are upfront with them you will probably find that they will be quite reasonable. You should negotiate another payment date with them. If they agree to a later payment date then you need to make sure that you pay them on the agreed date.
At SureSet we are a great believer in the better payment practice and encourage all our customers and suppliers to do the same.