Ladies and gentlemen, it is time we send the elephant in the room packing.
In my last post I identified two of the most common elephants in the room of a business owner. Not sure what I’m talking about? Find out here.
Two of the other biggest elephants that might be lingering in the room are bad debt and pursuing the wrong clients.
When out of control, bad debt can completely cripple a business. Bad debt is an obvious, looming elephant in the rooms of countless small businesses that do not want to discuss or address the issue.
This elephant needs to be kicked out of your business once and for all.
How? Monitor your cash flow constantly and make sure you are not letting your bad debt slip.
Check the client out before hand. If you are concerned about non-cash customers, require a credit check prior to commencing activity. You may also need to invoice a percentage of the work prior to starting any billable work to ensure the client can afford it and will take you seriously.
You may need to take a look at your payment terms. If you are regularly receiving late payment from clients you need to shorten your payment terms. 7 day and 14 day payment terms are no longer uncommon, particularly in small business. In my business I have found that offering a discount for prompt payment, such as 5% off for payment within 7 days, has worked very well.
Don’t be afraid to chase up late payment. Pick up the phone and kindly request payment. Go and collect the cheque instead of waiting for it to arrive in the mail.
If you do not feel comfortable chasing up late payments yourself, set up an email address for accounts and do not sign your name to it (e.g. email@example.com). You might even consider asking your book-keeper or accountant if chasing up bad debt is a service that they offer. Certainly use a debt collector if required.
Pursuing the wrong clients
Not everyone who is interested in your business is worth doing business with. Many start-ups learn this the hard way.
Don’t waste your time on potential clients that are not likely to be long-term customers or are more trouble than they are worth. If they do not understand and value what you offer and therefore question every aspect, then they are not the best use of your time and you risk spending more time on them than you can bill for. This is not the best use of your time, and time is required to be able to make money.
Watch your time. If a networking group does not hold any business potential in it for you, unless it is highly educational for you then you should find another networking group. Otherwise, consider it a social activity. Similarly, if you receive an invitation for a meeting or lunch from a stranger who wants to “see if there are any synergies in our business or if there is any way that we could do business together”, find out if it is a real opportunity or if it is a poor use of your time.
Learn to say ‘no’ to the average or weak business opportunities so you have the time and resource to invest your effort in the great opportunities.
Do you know of any other common elephants that a small business might have in the room? Have you successfully addressed an elephant in the room before?
If your debtors aren’t paying you on time, sign up to CreditorWatch to expose bad debtors and be alerted when the businesses you trade with fail to pay.