A growing number of small businesses are taking longer and longer to pay their debt, and according to QLD based small business financial advisor, Sue Winstanley, the bigger they are, the worse it’s going to be for small business.
Ms Winstanley works with many small businesses across the country improve their cash flow and has seen first hand the impact the financial crisis has had on these businesses.
“Downturns, or rising interest rates, can lead to payment delays of almost three months.”
“Very few businesses realise they have a 2 percent bad debt risk the moment they give credit – and it gets worse. At 60 days, it is 15 percent, at 120 days it increases to almost 50 percent.”
She advises small businesses to implement effective debtor management strategies to avoid being weighed down by debt. These include: training debtors to pay on time, assessing risk with credit checks before giving credit to new customers, build payment reminder dates into the system, and to look at outsourcing, as it can often be cheaper and more effective.
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