My mentor of over 30 years taught me a long time ago, “No Sale is a Sale – Until it is Paid”.
However, far too many small businesses allow their business to be used like a bank by their customers. Whether they do not wish to upset the customer by asking for payment or have the forlorn belief that they will simply pay at some point, there is no need to chase them.
Either of these thought processes is a recipe for disaster in normal trading conditions. However, we are far from normal trading conditions at present, given the financial pressures small businesses are experiencing and the raft of additional changes on 1 July.
- Payday Super cashflow implications
- Super increase to 12%
- Junior pay rates go up by 4.75 %
- Increases in electricity, gas & commercial leases
- Fuel excise increase of .16c + GST
- With a further increase on August 2nd of .16c + GST
- CGT changes for Businesses with $10 M + Turnover
I have told business owners for as long as I can remember that you can’t allow your customers to use you as a bank, that you need a strict credit policy, and that you need to adhere to it.
What triggered this for me during the week was listening to a podcast from Creditor Watch, where they mentioned that the “Lead Indicator” for Insolvency was continual overdue payments, which then continue to blow out. In these cases, they cited that there was little or no credit control in place by the affected business.
They further reported that B2B payment defaults increased by 42% (year-on-year) through the March 26 quarter. Since this time, business conditions have not improved, and with the raft of changes coming as above, they are not expected to improve in the short term.
Your poor cash flow means you can’t pay your suppliers on time, and so it goes on!
Key Takeaways
- Have a credit policy for all clients
- Be vigilant in collecting what you are owed
- Have accurate cash flow projections
- Work regularly with your financial advisers
- Know your numbers
