As a small business owner, sometimes it feels like we are running a race against the clock, always trying to acquire new clients and consumers, meet their needs and then bill them before our own debts come due at the end of the month. This rush to acquire new customers is an integral part of the drive that all savvy entrepreneurs need to have in order to succeed – but it can also prove to be your downfall.
Let’s face it – some clients are toxic, and will actually cause you more harm than good. Ideally, you want to attract responsible consumers who pay their bills on time and have a healthy credit report. Two or three of these clients is worth far more than ten clients who pay late – if ever – and always make loads of excuses.
Anticipate a Trickle Down Effect Before It Happens
Not only do you run the risk of bills that go permanently unpaid, a client who is always late to pay for their goods and services will have a trickle down effect onto the rest of your business. These excuses and the time that you spend chasing up with them cost you money, and can have a disastrous effect on your bottom line.
When you are waiting for your client to pay a large outstanding bill, you may not be able to make payments that you owe on vital supplies, and this can affect your ability to deliver work on time to honest, reliable customers. Why risk this? Although it may seem counter intuitive, it is often a good idea to turn away these potential consumers and politely tell them that you cannot take their business.
Run Credit Report Checks Regularly
If this is a regular problem for you, you may want to implement a policy of a brief, mandatory credit check on clients that you are considering taking on. This may be unnecessary if they will be a small part of your income, but before you take on a large client with massive orders, you have the right to ask for proof of their good financial behaviour. Direct them to this site, where they can check their credit report quickly and easily. Your prospective customers can then discreetly share their results with you, and you will be far more protected than if you solely ‘take them at their word.’
Consider Retainer Agreements
If we allowed all of our clients to have the benefit of the doubt, we would probably all be bankrupt – you need to have protections in place for your own peace of mind. In addition to checking their credit, you can also consider setting them up on a retainer. This means that they will deposit a set amount of money in advance of the work being completed, and ensures that you will have time for them each month. In this case, don’t be surprised if they want to thoroughly vet you! You can also consider starting gradually with them, and slowly building up over time once they have proved trustworthy.
Remember – this is your livelihood, and you deserve honest and responsible clients.