If you own a small business, manage one or even work for a small business then you have an important role here in our country. You are a major player in the US economy. In fact, you are pretty much the backbone of it.
A small business as you may know is any organization that employs 1-49 employees. And the SBA says that over half of Americans work for a small business. That is everything from the professional consultant, the lawncare company, that great breakfast place down the street and that local dental practice.
Small business survives on great relationships. Taking care of the customer and gaining a clear understanding of their needs, wants and issues. A small business develops a relationship with a customer, unlike big business. The small business takes care of the customer or patient, and the customer pays for their expertise, products and services. Hopefully on time.
But when a small business doesn’t get paid for what they provide, that can cause a whole host of issues. And as a collection agency that works with small business, we see these issues firsthand. Businesses struggling to get customers to pay on time and in some cases, pay at all.
And because a small business depends on their relationships and a good reputation, slow-paying customers cause problems and in many cases, an awkward situation for both the business and the customer.
Trust is a major factor in the small business world. The customer trusts your business and your staff to do what you said you were going to do and do it with competence. You trust that if you do the customer wants and they are happy, they’ll pay you. When those factors do not align, trust is broken and the relationship can suffer.
So, what happens when a small business doesn’t get paid?
Can you imagine not being able to pay your staff? Well it happens and late-paying customers can sometimes be the problem. We try to be gentle with customers, cut them some slack but eventually, not getting paid cause a chain reaction. Telling your staff that they are not getting paid this week is not only unacceptable, but it will severely damage your relationship with your team. No one wants to work for a business that can’t pay its staff. It can be the first sign of major trouble. And that’s when employees leave.
When you can’t pay your own bills, that can be the beginning of the end. Say you are a lawn care company that needs certain products to service customers. What happens when you can’t buy product such as fertilizer? Simple…You cannot take care of your customers. Eventually, they go somewhere else. And you lose that customer and others. Might seem a bit farfetched but it does happen. When you let overdue customers take longer than they should to pay, it adds up and you are now in a negative cash flow situation.
When a small business needs to pay its bills, and there is limited cash flow, one thing small business owners do is get behind on their taxes. The immediate needs are paying staff, keeping utilities on and paying rent. And while you can put off paying your taxes, you really shouldn’t. When you don’t pay your electric bill, your lights eventually go off. When you don’t pay your rent, your landlord evicts you. But when you fail to pay your taxes, it can take a while for that to catch up with you. And that can pile up quickly. Now the government is taking action to get their money from you. And it’s not a situation you want to be in.
American Profit Recovery is a collection agency so we know something about debt. While much of our time is spent helping small business and helping the consumer meet his or her obligations, we also work on B2B debt collections. Because there are times when that chain reaction we talked about earlier, hits the business hard. Image that scenario. You have a difficult time getting your customers to pay, tried to collect on those outstanding invoices and now because your customers are not paying, you are the one in collections. Don’t think so? It happens.
Take two minutes to view the video below from our own Matt Moskowitz. Matt talks about the pride and joy many small business owners have when they talk about what they have accomplished in business but also shares the struggles of many when it comes to riding that fine line of maintaining a great relationship with customers and get them to pay on time.