Let’s face it—the economy is doing really bad right now. It may not require soup lines, but everyone is feeling the pressure weigh down on them. Wages are going down while expenses are going up, and worst of all as the value of cash lowers, bills start to pile up. This has meant a huge increase in the number of bills being left unpaid. With everything so tight to begin with, creditors and businesses are in a tough spot. They need their bills paid on time because they themselves don’t have much spare cash lying around. This has led to repossessions and canceled accounts for many people because of the apparent necessity to keep payers in line.
However, this isn’t the only choice businesses have. Yes, of course, bills need to be paid just for your business to stay alive, but a single paid bill isn’t as valuable as a customer that will keep returning to you again and again. Even in an economy where businesses may be hanging on from month to month, companies still need to look down the road and think about ways to maintain a strong customer base even in rough times. Moreover, as the economy will eventually begin to turn, the few customers you do have will be ready to spend more once the financial situation improves.
Does this mean not having your customers pay bills? Naturally, this will make them very happy, but it will put you out of business. No, customers still have to pay bills, but leniency should be exercised when it comes to late payments. Severely penalizing customers when they are delinquent for a couple months only trims them of extra cash they might have spent at your business. Now it may appear to be money either way, but it’s probably a definite that your customers won’t be coming back if you give them huge late fees for delinquent payments.
In a slow economy customers are always looking for the best deal. One way to still maintain your prices and offer a competitive edge is to offer a more lenient pay schedule. Doing so keeps your position exactly the same as before the down turn without doing much more than improving your customer relations. Additionally, consider that your customers are often in the same position as your business is—they have income and expenses that don’t always time up exactly. So, just because a customer can’t pay immediately, doesn’t mean they won’t have the money in the future.
Word of mouth is very important—good customer relations spreads the word about your business and can draw other customers from other businesses. You may take a wash for a couple months, but if this turns around and puts more people at your door, it will definitely pay off just like any investment.
Simply put—putting your customers out of business puts you out of business. Remember, your customers are not ATMs, simply distributing cash as you need it. Instead, they are people with memories and will develop loyalty to a company that shows them leniency; especially in a tough time. They may miss a bill every once and a while, but if you let it slide in this tough climate, your customers will be paying your bills for years to come.
This is a tough one. You can achieve the balance if you are also getting a lot of credit from your suppliers. In other words you can give as much credit as you are getting
Norris´s last blog ..Return On Assets
I agree with you, but at the same time going out and shouting from the rooftops that the client has not paid is not likely to win you a lot of points or look all that good to potential clients. Some of my best clients to this day are the ones that went through a bit of a struggle and I showed some compassion to. I am not saying that you should get walked on, you can generally tell the difference between the two types of clients.
It is quiet right but sometimes it could create a big problem for their business.