Often times, it’s easy to forget that the global world around us can have an indirect impact on our business. Especially if we’re a small business that thrives on our direct community, when an international world leading business gets hit hard with bad debt, we’re simply glad we’re not in their shoes. However, the six degrees of separation theory isn’t far off when it comes to businesses and you may feel the impact of these business leaders bad debt.
Consider the businesses that you directly deal with. They also deal with six or so other businesses, and those businesses deal with another six businesses. Before long, if you map out the business chain, you soon will realize that you’re not too far away from those global business leaders, and their bad debt. So how do you protect yourself from incurring the consequences of their bad decisions?
These five tips will help protect you when a leader in your industry is taken down on bad debt.
- Monitor Your Accounts Receivable
Keep an extra watchful eye on your accounts receivable if you’re worried about feeling the effects of the bad debt plaguing your industry. Using in automated accounts receivable software can help to make this process even easier by creating detailed reports and alerting you when a customer is paying past due.
- Don’t Be Too Patient
If you typically have Net 30 terms to get paid from a client, don’t allow them to sink into Net 90. If they are a good customer that you deal with often and are having trouble paying you because their customers aren’t paying them, allow them a little extra time. Don’t let them drag you down with them, however. Give reasonable terms, but put your foot down when necessary.
- Stand Your Ground
If it’s taking a customer too long to pay, after you have sent multiple invoices and reminders, get tough. Make sure that you are given what you’re owed.
- Freeze Delinquent Accounts
If your customer isn’t paying you, cut off your services. There is no reason to continue providing them with your product or service when they still haven’t paid you for last month’s business. Using an automated accounts receivable software makes it easy to see who hasn’t paid and how many reminders have already been sent to them.
- Send Reminders Often
If you’re getting worried about a client who isn’t paying, send reminders early and often. An automated accounts receivable software can keep track of all communications with a client to show whether they were contacted via email or phone and what was discussed in those communications. This can help you to decide if you need to freeze your services and stand your ground.
When a crisis hits your industry, even if you’re the mom and pop shop down the street, don’t think that you’re safe from the hit. It only takes a few degrees of separation to put you in line to face the consequences of the big business with money problems.