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Friday, October 09, 2009
We have very unfortunately recently had to sue a former client for unpaid fees. The situation should have been quite simple even though they did not seem to be able to communicate with us properly. We had a clear contract, clear payment terms and there was no dispute over the amounts owed (well not that they had ever told us!).
So would you not think that getting paid in these circumstances should be quite straightforward?
The exercise that at long last that has got us to an agreement with our former client (ratified by the court) has in the end cost nearly £3,000 in legal fees and taken the best part of a year to complete. And now we have had to agree to a payment plan, so we still have to wait for our money!!
The moral of the story here is don't rely on the legal system to collect your debts for you. Yes occasionally as we have found it is necessary, but as a system it simply does not work! It is slow and expensive and at the end of the day very much works in the debtors favour! The debtor (the one that owes you your money!) has so many opportunities in the system to find reasons not to pay and raise reasons for disputes it is simply crazy!
When will the legal system be sorted out so that businesses can collect the money they are rightfully owed, easily, cheaply and quickly?
Thursday, October 08, 2009
In an economic downturn everything tends to shut down including our thinking. Any new idea suggests some risk and that is not acceptable. We believe that if we sit tight and batten down the hatches the storm will pass.
Yet new ideas are badly needed to simplify things, cut costs, do things in a different way, create new values etc. It is also true that the new conditions can open up new opportunities if we can see how to use them. For example new ideas for very cheap holidays should do very well.
Thinking is not just for surviving and problem solving. Any area of thinking can benefit from creativity. There may be a focus on smaller ideas rather than grand ideas, but the ideas still need to be generated.
Can you really afford to sit still and say: "There is a recession and I do not need to do anything?"
Wednesday, October 07, 2009
For some reason in the UK the norm seems to be 30 days or current month 30 days, and that is after you have raised the invoice. Often these days it seems to be even longer, 60 days, 90 days ...
Every time you make a sale and then raise an invoice (hopefully immediately!) you have to wait for your money.
You are therefore in effect lending your money to your customer ...in the often vague hope that you will be paid. And in lending this money what have you actually done about making sure you do get paid?
Most businesses in our experience do very little to ensure they can collect their money and on time, which when you think about it is pretty staggering! Remember, you are making:
- An interest free loan
- With no security
- No guarantee of payment
- To someone you probably know very little about
- With often no signed contract or terms of payment
- And no real penalty if they pay late!
How many banks do you know that you can get terms like that from? Yet your customer has you lending them your money on those terms!!
So, just give it a little thought. Check out your customers and ensure they are credit worthy. You may have little choice but to give credit if you want to trade in your market, but you do have a choice on being paid on time!
We have a useful fact sheet on credit management. E-mail me if you would like a copy!