It's now more important than ever to be paid on time. Photo / 123RF
Welcome to The Pivot Pod, where we'll figure out together what's next for small business. Hosted by Frances Cook, with a new expert on each episode. Today it's the tactics to get your invoice to the front of the queue.
Being a small business owner often means forging relationships with bigger players.
Which can mean, when it's time to get paid, a power imbalance puts you in a difficult position.
Listen to the podcast episode here:
Until recently, Fonterra was one of the main examples of this, known to make suppliers wait up to three months before they got paid. Happily Fonterra has now signalled they're ready to speed things up.
Sure, that's a David and Goliath example. But it's easy to see how small businesses were left in a sticky situation there, reliant on a major business that felt it could set the rules of engagement to suit itself.
Post-Covid 19 it's more important than ever that you're paid on time.
On The Pivot Pod I talked to Xero New Zealand and Pacific Islands managing director Craig Hudson about this problem, and how you can shift the odds in your favour. Here are his top tips.
Automation is your friend
Many invoicing services will allow you to send regular reminders of a bill coming up, and then when it's overdue. Or you can send automated messages through your email.
The squeaky wheel gets the grease, and you want to make sure you're top of mind when they're paying bills.
It's even better because you don't need to spend any work hours on it.
Hudson said technology should do its part to remove the stress of early conversations.
"If they continually get an invoice reminder, saying 'your invoice is due in three days, one day, it's due today, it's one day late'.
"It's a little gentle prod, and it's almost like that little nag going on, that they just want to go away, so they pay their invoice."
If you need to have a conversation, keep it neutral and constructive
Money is a stressful topic, and you're doubtless worried about being able to pay your own suppliers and staff.
But talking about where you and the customer are at will keep things focused on the end goal, and give you both the information you need to make tough choices.
"Constructive is the key. Being able to have a proper conversation with your customers is imperative, so that you understand and lines of communication are open.
"Circumstances can change at any moment. If you don't know, that's almost worse than someone just telling you 'right, I'm going to pay you in three weeks time', because then you can budget for it," Hudson said.
"Context is really important. If you don't know why it's late, then it's just late, and you want your money.
"So if you're able to have open constructive conversations, where you can choose to be as open about your particular situation as you like, you'll see that we're all in the same storm."
Know when to hold them, and know when to fold them
You might be wanting to hold on to every customer right now, but there comes a point where a regular late payer is more hassle than they're worth.
The time you spend chasing them, and the difficulties your staff might face in dealing with them, all drives productivity lower and has a real impact on your bottom line.
Hudson said in previous roles he's had to fire customers and it went better than you might expect.
"One of the most satisfying and gratifying things, not only for me but also the wider team, was when I fired customers because of bad behaviour.
"What you don't realise is the ramifications of stress that some of those customers have on the team.
"Whether it be the admin staff who are having to contact them on a regular basis to talk about payments, or drivers turning up and being abused.
"The sense that we had the staff's back, to get rid of a customer and not just do business because business is important, was an unseen gem that I held on to."
Listen to the full interview on The Pivot Pod episode above.
If you have a question about this podcast, or question you'd like answered in the next one, come and talk to me about it. I'm on Facebook here, Instagram here and Twitter here.
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