Good things come to those who wait. Because patience is a virtue, right?
If you’re ice fishing or waiting for broken bones to heal, being patient can indeed be useful. But in managing accounts receivable, demonstrating a willingness to wait can bring results ranging from bad to catastrophic.
Here are 5 strong reasons why patience is not a business owner’s friend:
1. Patience breaks the promise
A business deal includes a promise from each end: the delivery of a product or service from the vendor, and payment from the customer. I don’t know of any successful business that doesn’t insist on timely payment. When a customer doesn’t pay in accordance with your agreed-upon terms, the deal is not being honoured. By waiting, you give the message this is okay. Violating agreements is not okay.
2. Patience decreases your priority
It’s unlikely your customer pays for everything long after receiving the goods. Grocery stores, gas stations and other vendors take payment immediately (if credit is granted, it is always by a third party who makes money doing so). Being weak in enforcing payment terms positions your account as one that can be put off and flags your business as a low payment priority—setting you up for more of the same treatment.
3. Patience increases risk
If your customer is having cash flow issues, extending your payment terms can be especially dangerous. It’s the low-priority accounts that are almost left hanging when a debtor business fails. That’s when patience hurts most. Whereas patience gives the debtor time to ignore problems and dig a deeper hole, insisting on prompt payment encourages proactive behaviour down the line. There are strong reasons why your chances of ever being paid decrease with every passing month. Use this online debt recovery calculator to see the value of your outstanding accounts receivable in real time.
4. Patience undermines credibility
When you allow a debtor to delay paying, you deliver the message that your payment terms are meaningless—and suggesting the same applies to other terms and standards. It’s hard to fault your business for running a tight ship, but no one respects (or wants to be seen on) a leaky one.
5. Patience hurts your relationships
Lastly, when you let overdue accounts slide, you become less able to fulfill your own commitments. Your business doesn’t pull money out of thin air, and each sale costs you. So very patient owners often wind up apologizing and looking bad to suppliers because of the knock-on effect. It’s bad for your cherished relationships and your brand reputation.
What to do?
The good news: your future is not defined by how you’ve managed overdue accounts receivable in the past. Revise your policies and your payment expectations. (Read this popular article about how to get paid by—if not before—the due date.) And communicate with your customers, without apologies, about your new terms. Charge late fees, and be quick to send the file to your collection agency. Doing so not only establishes an important precedent, but I’ve seen many times how it can reverse the domino effect through the supply chain.
Need more help? Reach out to me or my team any time, and download the handy guide to choosing a collection agency in Canada with the link below. We’re here to help your business be more effective and establish highest payment priority with customers through quick and ethical debt collection.