Get paid on time
by Shivani Gupta,
Newcastle Herald Small Business Column,
published Monday, 10 October 2011
I read about some research recently that showed that two-thirds of Australian businesses are taking longer than the standard 30-day period to pay company accounts and more Australian firms are paying their bills more than three months late compared to last year.
The Dun & Bradstreet report said the national figure for payment terms reached 53.4 days during the June quarter 2011. Business-to-business payment times improved slightly during the quarter but the number of severely delinquent payments (90 days or more overdue) jumped almost 20 per cent compared with the same quarter in 2010. The number of businesses paying trade accounts between 61 and 90 days late also increased by 36 per cent on last year.
Out of interest, transportation, wholesale and services firms were the best payers in the June quarter. The forestry industry was the slowest to pay trade accounts during the quarter and had the worst deterioration in payment terms in the last 12 months. Larger firms have traditionally been the slowest payers with payment terms for firms with 500 or more employees sitting three days above the national average at 56.3 days.
Not being paid on time for work you have done can be especially problematic for small businesses that do not necessarily have large cash reserves. If you have paid others for work to complete that job (whether it be staff or other businesses) then this represents a significant drain on cash-flow. The report showed that smaller firms struggled more than larger ones over the last 12 months, with payment terms blowing out by an average of two days compared with the June quarter.
The reflection I had when reading this data was to ensure I maintained a focus on invoicing and debt collecting. Sometimes you can let things slip, particularly if business is going well and you have some cash flow. Many small business people are artisans or professionals who get into business for love of their craft rather than money per se.
The focus should start with quoting, which is where you outline your payment terms. For first time clients or if materials have to be purchased it can be acceptable to request a deposit and progress payments. Other small businesses insist on payment on delivery.
Rather than wait until the end of the month, try and invoice as soon you complete the job. And if a client doesn’t pay on time have a system to generate a friendly reminder email or paper statement. Have another trigger where you either make a call or have a more formal letter sent.
You have done the hard work, so you need to make sure you get paid in a timely manner.