- Chasing overdue invoices should be your top priority to survive this pandemic.
- Shift your mindset, and don’t be afraid to demand what is owed to you.
- Consult a debt recovery specialist and move on to find better clients and customers.
Since the coronavirus hit Australian shores, I have been inundated with phone calls from anxious small business owners needing help to recoup money from unpaid invoices. Many of these payments were long overdue, some more than twelve months old.
The fact is, it shouldn’t take a global pandemic to chase up the money you are owed! Getting paid on time is crucial to maintain your cash flow to continue trading through the good times and the bad.
According to CreditorWatch, 50% of companies that incur a payment default go into administration within 18 months. And as more experts cast a gloomy outlook on the economy due to the coronavirus, I suspect the figures will likely be much higher.
From my experience, one of the most common reasons for payment defaults is the ‘push/pull’ effect many business owners experience when they wear the two hats of a business owner and an accountant. In the former, you are engaged to provide a service which rests on having a good relationship with the client. If the relationship is good, the trust factor builds up and then, unfortunately, this becomes a barrier to ask for payment or chase money that is due.
You must understand that getting paid on time is crucial for business survival during this pandemic. Here’s how to make sure you get paid the money you are owed:
1. Shift your mindset
If you’ve done the work you agreed to do with the client, then the money is yours. Get this into your head from the get-go. They reap the benefit of your work. Therefore, they owe you the money for those benefits and you don’t need to feel bad about asking for it.
2. It’s not about you, it’s about your business
Remember that the money is not owed to you, it is owed to your business. Take yourself out of the equation. You owe it to your business and your employees to keep the books balanced and that means getting paid on time.
3. Toughen up
Even if you have money in the bank to see you through, don’t let payments owed go past their due date because your client’s doing it tough right now. Everybody’s doing it tough and that also includes you!
The longer you leave it, the more money it will cost you to chase it down in time and resources. The government hand-outs such as JobKeeper are also there to keep businesses trading, which means paying bills and getting paid on time.
4. Use a letter of demand
Say what you do and do what you say. After a few prompts, then just issue a letter of demand if nothing happens. State that this is the first and final notice and after this, if no payment is sent, state that it will be escalated to a third party.
5. Seek expert help
If you’ve issued your letter of demand and the payment is still not made, then don’t waste any more time (or stress) on it. Leave it to the experts and there are experts you can turn to, depending on the industry you’re in.
You can enlist the help of a small business lawyer or go through alternative dispute resolution via a mediator.
The Australian Small Business and Family Enterprise Ombudsman offers a low-cost mediation service for small businesses disputes and has a 90% success rate. Call them on 1300 650 460 to find the contact details of the Small Business Commissioner in your state.
6. Put down your tools
Do not continue to work for a client who owes you money. If they haven’t paid you, it makes no sense to waste any more time doing any more work and not getting paid for it.
Make this crystal clear to the client and do not feel bad about it. If you are uncomfortable because you are concerned about spoiling the relationship, be assured that the client is not.
If they have not paid you on time, they are not as invested in the relationship as you think they are. Press pause, tell them clearly why and then wait for payment. If none ensues – refer to the points outlined above.
7. Move on
Don’t work for unscrupulous clients who take and don’t give – they are not worth your time. Remember they are not the only source of work for you. There are great clients out there to find. Go and find them!
Instead of continuing to work and chasing payment, you should spend your time working on, rather than in your business. Consider your next move, seek out new clients, and double up your marketing.
By refusing to continue to work for nothing, you are sending a strong and clear message to your client that you are serious. You are also laying the groundwork to ensure you have guidelines in place to prevent it from happening again.
By investing your time into your business growth rather than continuing in what is essentially a hopeless situation, you are not only freeing up your time, you are also freeing your mind. Working and not knowing whether you will be paid or not is damaging to more than your business bank account. It can damage your health by causing huge amounts of anxiety.
Put your focus and time where it’s needed. Having new goals and new work to focus on will help your business stay afloat during these choppy times, so you can continue not only to survive but to thrive post coronavirus.
Last year, our team at Contractors Debt Recovery recovered more than $6 million in monies and over $62 million to date, owed to small businesses, enabling them to pay wages, bills and keep on trading. For further information, visit our website or call 1300 669 075.
Do you need help with
There are 111 business advisors on standby