In business, how would you go about taking away a customers net 30 terms?

Question

my family owns a business and the majority of my customers have net 30 to net 90 terms. (not my choice) MANY of these people simply choose when they do and do not want to pay their bills. or, net 30 means nothing to them and they pay pretty much when they want to. our president is very lax and easy going meaning he will do nothing about it. and business savy people out there who can make some suggestions? how can i take away a companies terms but in a professional way? or how can i go around my boss in order to get things done for the good of the company?

Answer 1

Terms are much like speed limits in the real world -- they're a ballpark, and more often than not, a suggested minimum. If you do a lot of trade/industry work, for example, typically you get paid when your customer's customer pays. With a very large company or institution, you're looking at 30 to 60 days, sometimes 90, whereas small companies have simpler A/R processes and will pay within the month if they aren't cash-strapped. As long as they aren't accumulating 100 new orders while letting the first ones gather dust, my professional advice is to let it ride even though it's against the "rules."

Especially if these are long-standing customers, you get a sense of their payment cycles. We have one heavy user who pays two or three times per year, and I was beside myself about it until I saw that yes, they do settle up regularly. Your president is probably being lax because he knows he'll get paid by these people. If he's been in business a long time it's also possible that he was (or is) their customer and was given lots of slack in the past. In his mind, as long as he gets paid, it doesn't much matter when -- and don't mistake easygoingness for inattention: He knows who the trouble customers are and who is a good one who just writes cheques twice a year.

It also changes with the industry. My industry is print, which is 24/7 busy from fall to early spring, and then mostly dead in the summer, so the payments approximate that pattern, no matter how I feel about it.

Where you put your foot down is with new or very occasional clients who let the bills go to 60, 90, 120, 180 days, and there's no relationship there to preserve. Small businesses, the longer they operate, tend to have two or three sets of rules for their customers depending on type and how long they've patronizing you. If there is a customer you suspect is just a deadbeat who went to you after exhausting his credit elsewhere, then ask what you should do to speed their payment along. I do my collections calls around the mid-month because it's the furthest from when rent and mortgage payments are due and it's also when the staff get paid, so I know the accountant is in. (A common stall tactic is that their bookkeeper is only there once per week or once per month, and gee whiz, you just missed him.)

If you're still dead set on changing their terms, go into the accounting software and change the terms on their invoices to "Due on receipt," but don't expect that to influence when they pay. It's mostly unnoticed by the customers, and if they're regular customers they'll just maintain the status quo.

I know it's frustrating (and perhaps a little insulting), but remember that you aren't out money if someone pays in 70 days versus 15, as long as they get it done. The risk of alienating a good client isn't usually worth it.