Pretty much every business owner in the world has had to deal with a client who doesn’t want to pay. They never had and still don’t have any intention of stumping up the cash. So, you follow up on the debt for a while until the process gets tiresome and annoying. Then, you give it up as a lost cause and vow never to let it happen again. Does this scenario sound familiar? It should because thousands of companies walk this path on a yearly basis. But, it isn’t the right approach to take, and here are the reasons why.
The Rumour Mill
Companies talk and your name might come up in conversation. When it does, it won’t be “I respect that person.” Nope, it’ll be “that person is a pushover.” Whether you like it or not, the industry judges people on their actions. Anyone who doesn’t stand up tall is going to get tagged as a lightweight. The consequences are two-fold. Firstly, your peers might think it reflects poorly on the firm and they refuse to do business. Secondly, they might push their luck and skip out on the check. In the business world, your reputation is everything, which is why you want to be the company who always collects.
It is easy to get into a routine when you are an owner. From manufacturing to selling, companies like to develop a plan of attack because they are creatures of habit. Sadly, bad habits can creep in and cause chaos. Although companies never think it will happen, there is a chance you will start to get soft with other debtors. Rather than making an example, you’ll think “I can’t be bothered with the hassle.” Before you know it, the company could miss out on a fortune of unpaid invoices all because of one bad debt.
It’s a stereotype, but startups and SMEs are continually fighting against debt. From hiring invoice financing companies to employing an accountant, you might be thinking of ways to stave off your creditors. When the debt begins to mount, the firm needs every penny it can muster to stay in the black. There are ways to save money, but it’s best to collect the money other companies owe you first. It might be the difference between staying open and closing down. Big companies can’t afford to lose money and neither can you.
Hopefully, everything is going well and business is booming. For the lucky ones, a missed payment here and there doesn’t make a huge difference. It’s nice to make as much money as possible yet it isn’t essential when you have a contingency plan. Not to scare you, but a business’s fortunes can change like the weather. When it happens, the money you have now might not be enough to keep the company afloat. Any invoices which don’t get paid need satisfying asap just in case. A boss never knows when disaster will strike.
Although it’s time-consuming and frustrating, to write off debt is a potential disaster.