Why not supplying bad customers makes perfect business sense
15/03/2016 / Comments 0
For many businesses attracting customers is a challenge in itself, so you probably think we’re crazy for suggesting you should stop supplying some of them.
But, when those customers are coming between you and a healthy cash flow, they are arguably no longer worth the money they spend with you.
According to Zurich, more than half (53%) of Britain’s SMEs are owed an estimated £255 billion from late payments – a number that could be significantly reduced if businesses stopped supplying repeat offenders. Yet, understandably so, many businesses still feel pressure to continue working with those who continue to pay late.
Whilst ending customer relationships is arguably a last resort, implementing a stop list for the worst offenders can be beneficial.
Once on the stop list businesses should be informed and not supplied with any further goods or services until all outstanding invoices have been settled. If after this you continue to supply the customer, it could be beneficial to ask for an up-front payment or deposit when placing the order.
Still not convinced? Here are four reasons why implementing a stop list makes perfect business sense.
1. Prevent late payment
Persistently late payers are never going to clean up their act if you keep letting them get away with it. Refusing to supply the worst offenders can be a great way to stamp your authority and protect your business from late payment going forward. If they value your service or product and want to continue doing business with you they’ll have no choice but to adhere to better payment practices.
2. Protect cash flow
As soon as an invoice exceeds credit terms it begins to impact on your cash flow. Without money coming in on time your business may fall behind on payments of its own, racking up high levels of interest and putting strain on your day-to-day business activity. Taking a tough stance on late payment protects your cash flow and ultimately your business’s future.
3. Save time and resource
Chasing overdue payments often requires a significant amount of time and resource that some businesses may not be able to afford to waste on persistently bad customers. By implementing a stop list and preventing late payment you remove the need to invest resources into chasing your worst offenders.
4. Improve morale
Dealing with the constant excuses of persistent late payers can be hard work – even for the best credit controllers. By removing or improving the practices of your negative customers your employees will benefit from not having to put up with their excuses.