“If you are going to work for yourself you cannot be afraid to ask for your own money.” These are words that I recall my father telling people several times when they asked him about whether they should start their own businesses and what advice he would give. I have since echoed that advice many times to various businesses especially those in the rural environment. Indeed many times I have said to farmers, agricultural contractors, engineers and other service providers to beware people, especially farmers, who are bad payers. A business cannot wait for harvest, the sale of livestock or better times to get paid for that is the job of their bankers to provide appropriate facilities.
Now what I am saying may appear harsh, but it is not personal…..it is business. The rural economy is littered with too many people that are bad payers and even those that have cash available can see it as a game to get away with paying as late as possible. This has had real consequences, for example in veterinary practises where non-payment, late payment and constant price haggling has made farm animal veterinary practise commercially unattractive, especially when compared to small animal and pets veterinary practise which has been targeted by large groups as a profitable investment. Similarly unreasonable late payments has had a devastating effect on entry level start ups in contracting and service work adding a barrier to business in the form of greater working capital cash being required.
Indeed I once spent two half days in a contracting business that was in danger of failing and solved their cash flow problem by phoning on their behalf and getting many of their debtors to pay them.
However, with the best will in the world all businesses will experience non-payment or late payment from time to time. The following will give some tips and ideas about how to deal with this.
To enforce a debt it is best to have clear terms of trade at the outset stating in writing when payment is due. This then allows you to set up a simple business-like process. Some people will try to make a request for payment a personal slur when in reality it is business and at the heart of you surviving and prospering. Do not allow yourself to be distracted from this.
Typically after and initial invoice or invoices if you have not been paid you can send a statement of account as soon as, or at least within three working days, of it falling overdue. Now all this sounds time consuming but regardless of your business size it is possible to automate the issue of invoices and statements and chasers to a certain degree by using various apps and accounting services. Three key ones that you may wish to look at are:
Using such software and apps can help you stay on top of chasing debt and give you the gift of time.
Processes are fine, but you do need to consider your business vulnerability in enforcing a debt. If the person owing you money is a customer upon which you rely for a significant portion of your sales you need to be realistic about the risk of losing them as a customer. However, this should NOT discourage you from asking for payment, indeed it makes it all he more important as you will need honest and frank conversations if there is a problem and whether part-payments should be considered.
All reasonable offers to make part payments should be considered. Any agreement should be ratified in writing so that it is clear to both parties what has been agreed. If the firm owing you money breaks this agreement that may help you with the legal debt enforcement process. As a rule of thumb you should look to retrieve your cost of production amount in as short a period as you can agree so that the risk of outright loss to yourself is reduced.
In the event of outright refusal to pay you should take immediate action – the scale of this can vary from a solicitor’s letter to seeking a County Court Judgement and subsequent enforcement. I recommend looking at solicitors to do this and enquiring with different firms as many have relatively low cost methods of pursuing debt with fixed cost letters. You can do this yourself and the County Court process is easy to follow online if you have the time and ability to do this.
When enforcing a debt the amount of time and effort you spend on it should be proportionate to the amount owed. The sad fact is that relatively smaller amounts may be better to right off as a loss.
Finally remember that a customer or client that does not pay you can be worse than having no customer at all.
