What do you think of businesses that don’t pay their bills on time? No, stop, what do you think about people that don’t pay their bills on time? This has nothing to do with businesses, and everything to do with individuals choosing to not pay.
This article summarises a discussion a group were having recently, about why it’s harder to fix than it should be. What are your views?
A growing problem?
The economy is recovering; businesses are trying to grow again. Is this where unmanaged, problematic, debtors grow? You’re probably reading this as an Accountant running your own firm, with clients who run their own small businesses. How do you, could you, or should you, help those clients?
Who is to blame?
OK, it’s the person who hasn’t paid, they clearly have caused the problem. But, there may be more to it; is it also the fault of the person who allowed the debt to grow? One thought might be creating the right focus on this problem, with an effective key performance indicator process. Download our free report “What are KPIs, why and how should I use them”, it's free and waiting for you to download right now. Click here for instant access (email address required).
What is it that goes wrong?
There are a number of things that could be going on, helping people to think differently about their debtors is the key.
- A simple start. How often do people look at their own debts? If a company never asks for their money, chases for the debt or really thinks about their debtors, are they also at fault? In my experience there are quite a few of these! What should these people do?
- What about when people don’t pay, despite being chased? Does it get harder now? Many people are afraid of taking the next step, making a clear demand, having a debt process or handing it over to a debt collection company. What’s the issue here?
- What about ongoing customers? Have you come across people that say “we can’t really chase that debt, or he’d stop trading with us and we need that income”? From a logical stance this makes no sense; ditch the customer you won’t earn anything if you don’t get paid! Why seeing through a clearly focused lens like this so hard at times? Out of interest, what are your views on people that carry on buying products, knowing that they aren’t clearing their debt (and possibly have no ability to pay)?
- What about friends? Now it gets really hard. Many small businesses are trading with other small businesses and the relationship has developed to one of friends, rather than purely business. Should this cloud the debtors issue even further – no. Does it, YES! How can one disentangle oneself from the friendship issue, or help others to?
- Embarrassment? Could they also be embarrassed that they allowed the situation to grow? How would you help them think about that?
- Anger and rage? Does helping people focus on their feelings about the person that doesn’t pay their bills help, or hinder?
10 ways of getting your bills paid quicker is more direct than this article, which was written to prompt thinking.
At one level this is easy, but is it really? Where do feelings get in the way, and where do they help resolution?
Why does this issue cause so many problems and often get badly managed?