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Home > The Off Farm Income Podcast > Dealing With Slow And “No” Paying Customers | Bonus Episode
Podcast: The Off Farm Income Podcast
Episode:

Dealing With Slow And “No” Paying Customers | Bonus Episode
Category: Business
Duration: 00:56:03
Publish Date: 2020-11-05 07:30:43
Description: SHOW NOTES Here are the show notes from the first time that I ran this episode.  I hope this is helpful to you as navigate the tricky waters of dealing with customers who pay slow! KEY POINTS:  80% of small businesses receive late payments - paysimple 64% of small businesses have clients who don't pay for 60 days - Wall Street Journal In agriculture, just like everywhere else, some customers have a tendency to pay slowly.  They're our customer right?  They deserve some grace.  That is true, but slow payment for services or products can create a host of problems for the small business owner, namely a cash flow problem. The term cash flow gets spread around so much that everyone assumes that it is widely know what is meant by this term.  But for simplicities sake, let's explain it.  Imagine that you worked two weeks last month on a big project for one customer.  This cost you $2200 in labor, and the pay period just ended.  Your big customer has yet to pay you for the job, but you just cut the payroll check to pay your employees on time.  That wiped out all of the money in your business checking account, and there are more bills coming.  You are out of cash - this is a cash flow problem. This can be a tricky issue in agriculture.  We understand that a lot of our customers who are farming and ranching only get paid once per year.  So, they understand cash flow problems really well.  However, what do we do when we need payment to keep our businesses running.  We need to walk a fine line of understanding and respecting the business model our farmer and rancher customers use and not drowning ourselves in debt to keep up and running. As a small business owner that services the agricultural community you have a couple of choices.  You can use the "stick or carrot" approach to encourage faster payment.  Or, you choose between living with slow payment or taking action to remedy the situation. The Stick Or Carrot Approach With this approach you can encourage expedient payment of invoices by either threatening or incentivizing your customer.  Let's look at some options: Carrot: Offer an incentive to your customers for early payment.  Perhaps a percentage discount or free hour of service on your next visit.  This is a way to motivate your customer to pay early, but does this bother you?  Do you want to give some of your revenue back to get your customer to do what they should be doing already? Stick: Have a late payment fee built into your invoice.  Make it clear to your customer that if they do not submit payment within 30 days that they face a 2% late payment fee.  If you do this, and a customer fails to pay on time do you actually try to collect the 2%?  Or, do you chalk this up as a bluff intended to speed up payment for most of your customers, and just accept the late payment from the others.  Trying to collect this penalty from a customer who was going to pay, just slowly, could lead to hard feelings and a distressed or non-existent business relationship Carrot: Use a service like PayPal to allow alternative methods of payment.  Perhaps it is not that your customer does not have the funds.  Maybe the thought of sitting down at a desk, filling out a check and mailing it to you is unappealing to your slow paying customer.  If they could just navigate a couple links on their smartphone and pay you, you could possibly have your money within moments of them opening the mail and finding your invoice. Stick: Refuse further service to a customer until you are paid.  This makes sense right?  But how do you approach this?  I have found this to be an effective method when combined with humble approach.  Something like, "I'd be happy to come service your property again, but you know I haven't been paid for the first time I was out yet.  I'll need to get settled up first."  Don't pin your customer in a corner.  For most people a gentle reminder is all that they will need. Live With It Or Take Action
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