Contrary to what many believe, running a business isn’t difficult — in fact, anyone with a pencil sharpener and a hole-punch can do it.
Going bust is also very easy, as anyone with an 18 carat gold pencil sharpener and platinum hole-punch will testify.
Firstly, let’s assume you’ve understood the rules of business:-
- Have a product or service that people want
- Sell it to them for more than it costs you
- Realise the cost of running your business (including yourself, your pencil and hole-puncher) is an expense that needs to be taken into account in point 2.
- Sell enough to produce an overall profit
- Get paid
- Step and repeat
So far so good?
No — because point 5 is proving impossible. No one’s actually paying you.
Before you throw it all away, let’s look at your options.
Bury your head
Your cashflow’s bound to be a short-term issue. After all it’s only a handful of customers that aren’t paying you. Right?
Wrong. Unless you reduce the number of customers you sell to, and insist on upfront payment, this is always going to be an issue. To be 100% sure it won’t happen again, don’t sell anyone anything ever again.
The bank’s had its eye on your home, car and spouse for a while so why not give it all to them.
If your problem is people aren’t paying you, why get into debt over it? It’s addressing the symptom not the cause. It’s like taking pain-killers when you’ve got a broken leg.
Brilliant. If your customers don’t pay, borrow the value of what they should have paid from someone else. You can then amuse yourself by wondering whether your customers will actually really pay you before you need to repay the money they should‘ve paid that you now owe. For extra fun you can try work out the charges you’re paying to do this. No one’s actually managed it — even the Invoice-Discounters you’ve borrowed from aren’t quite sure, but the standing charges, interest, admin and processing fees (not to mention penalties) will always come to exactly 3.1412 times the amount you expected them to be.
Offer a Settlement Discount
This has to be the worst solution of all. Regrettably, I speak from personal experience. I’ve gone into (much more) detail on this on another of my articles, so suffice to say in order to avoid going back into therapy I’ll simply tell you it doesn’t work. I offered a 5% reduction for payment within 14 days and all I got was the same late-payers taking 90+ days and still deducting the 5% before payment. My prompt payers continued to pay promptly — so all I was left with was the same problem, but with only 95% of my income.
As if that wasn’t bad enough, I then had to decide whether it was worth chasing the short-payers for the soppy little five-percents (I decided not to as a) I’d ruin all my relationships and b) I couldn’t be arsed) — so I then had to raise an armload of credit-notes to balance my books.
Join the Circus
Not really a solution to your cashflow issue, but at this point it’s probably worthy of consideration.
Sign up to Peasy
It’s not by accident we came up with the only credible solution to getting people to pay their bills on time. They’ll also still want to be your friend and do business with you.
Actually, it’s taken years to do what is now the most blatantly obvious solution — reward customers for paying promptly.
For less than the cost of any other alternative, Peasy allows you to incentivise your customers to pay early (even immediately) by rewarding them with Avios, Cashback or a donation to charity. Quite simply, the quicker they pay, the bigger their reward. They’ll actually want to pay early. They’ll also want to do more business with you. Even your prompt payers could pay quicker — and your slow payers will want to name their children after you*
*Depends on your name.
Co-Founder & CEO
Getting Customers to Pay Quicker — and Love you for it