Don’t Bankroll your Customers’ Businesses

One of the most pertinent lessons for small business owners is that you can’t afford to let your clients use you as their bank because your bank may not be as supportive as they once were. Not that getting a loan has ever been easy, but it suddenly got tougher a couple of years ago and it is likely to remain that way.  

A common reason SME owners need short-term cash top-ups is to manage while slow-paying clients get round to paying their debts. A recent survey by Xero of their users revealed that around 60% of invoices are paid late and more than a third are at least 2 weeks late. Irrespective of where in the world they ran the study, the results are essentially the same. Small businesses have a hard time getting paid. 

Cash keeps a business going on a day-to-day basis. So businesses that find themselves needing cash top-ups while they wait for their clients to pay up, may be forced to use alternatives to bank loans, which will almost certainly not be inexpensive.  


The best approach by far, is to get paid up front where possible.  

Other strategies that you can employ to mitigate late payments include: 

  • Invoice as soon as possible – this way the value of your work will still be fresh in your client’s mind. Email your invoice for super efficient delivery. 

  • Don’t wait, chase – never procrastinate when dealing with slow payers. Don’t wait until it is two weeks overdue before reminding them, remind them as soon as payment becomes overdue.  

  • Then keep talking – let them know that you are serious about getting paid. 

  • Agree terms up front – best place to start. Advising clients of your costing structure up front helps ensure they’re making an informed decision and so will be less likely to question pricing at invoice time. 

  • Partial up-front payment – a partial payment up front followed by progress payments is a good option, particularly where you have a new client relationship or you have a sale with materials as part of the supply. You don’t want to be left chasing a client for payment well after paying your supplier.  At the very least, get the cost of the materials paid for up front. 

  • Variances from agreed terms – ensure you negotiate, and get a written and signed agreement of, any further terms before starting work. This will reduce any nasty surprises on the part of either party. 

  • Be aware of your margins.  Slow payers will very quickly ruin any profit.  Be prepared to walk away from some jobs. 

Implementing a strategy is hard, most people take the attitude that any business is better than no business.  Wrong!  Business is business.  If you set client expectations up front and follow through on your strategy, the client will still love you tomorrow.