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Tackling late payments – what you need to know

If you have sleepless nights because you worry that your customers are not paying you quickly enough so you can pay your own bills, then you need to make some changes.

At Ozlop it is not unusual to meet customers who find it difficult to get paid. But often part of the problem comes from hard-pressed owners not being organised about keeping a track of who has paid and who hasn’t.

Let me tell you about a cake maker I met recently, who ended up in debt after not noticing that a few clients had missed payments.

Booming business

Sarah’s passion is creating wedding cakes, and most of her annual income is earned during the summer months. She was diligent about the books, conscious that she needed to put money aside to keep her going through quieter winter months. She also squirreled a bit extra away so that she could buy some new equipment.

At the beginning of the last wedding season, Sarah found that although she had been saving, she had not set aside enough to buy new tools she desperately wanted. With several weddings booked and deposits paid, the only option was to take out a loan and repay it once customers paid her.

All three weddings were a success, everybody loved the wonderful cake creations.

When is payday?

In the weeks that followed, Sarah waited quietly to be paid. She didn’t want to make a fuss when the payments due date was missed, she was nervous about chasing a newly married couple for a few hundred quid and she expected the money would come in eventually.

When Sarah came to Ozlop with books that needed troubleshooting, she had lost track of who had paid her what. Her own bills were starting to pile up, she had a loan to repay and Christmas was fast approaching and she was worried she wouldn’t have enough money to buy her children presents. What should she do?

With our help in providing clear and accurate bookkeeping, Sarah was able to pinpoint where payments had been missed and who she would need to contact urgently.

Talking money

When you’re running a small business, talking money with customers is vital. Sarah thought because she had a good rapport with her brides-to-be they would automatically pay. She was nervous about chasing them in their honeymoon period, but then left it several months before even picking up the phone to ask for her money. In the meantime, she neglected her own bills.

She might have avoided the stress of waiting to be paid if she had been in regular contact with her customers to remind them of how much was owed and when. A few gentle reminder emails would have generally been sufficient.

At Ozlop we specialise in delivering timely and accurate books that will help your business identify financial troubles before they arise. When you know that the money is coming in and it will meet your commitments, you can concentrate on your business and customers without the worry of a nasty financial surprise. If you want to talk about how we can help you, get in touch.

David Vine – small business specialist and Managing Director at Ozlop.

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