Late payments can be life-threatening for small firms. When cashflow is tight it can be extremely difficult for small businesses to operate freely and to their full potential, however the sad truth is that waiting for debtors to pay-up is commonplace for many companies.
Make sure you run a credit check each time you sign a deal with a retailer. Find out if they have anything in their history that indicates they might be prone to paying late; most of the larger retailers should have a fairly sound credit rating but check the payment terms as they may request longer payment periods and you may find yourself supplying products without receiving payment for several months.
Building strong relationships with your retailers is an obvious and easy way to help avoid problems with late payments. A solid rapport should help to create an environment of close co-operation where issues can be identified and resolved at the earliest opportunity.
Establishing an efficient system to protect against late payments can have enormous benefits and may prove to be the difference between sink or swim for your business. But there are also things you can do to prevent being faced with late payment problems. Neil Westwood from Magic Whiteboard recommends sending out regular weekly statements to debtors. This will help you keep on top of cashflow and avoid money shortages, which will enable you to fulfil your orders.
It might also be worth investing in an automatic reminder system to email debtors every week. With late payers, it may be necessary to ring them up every week until they pay up, however with particularly bad debtors, you may need to resort to threats of legal action.