Last night’s Startups Live event in Leeds had one reoccurring theme worth commenting on: getting paid. Or to be more specific, not getting paid.
Late payment is talked about a lot. It’s one of those ‘issues’ regularly flagged up in surveys and used as a political weapon by lobbyists and the opposition. Late payment, red tape, cashflow… issues that business ‘experts’ like to talk about without actually offering any practical advice to the people they’re claiming to represent.
Even established entrepreneurs like to gloss over late payment when recounting their early days, often passing on little more insight than ‘it was an issue early on’. Seems the only people you ever hear talking about ‘how to actually get paid’ are banks and financial institutions with the agenda of securing new business.
So… it was massively refreshing to hear detailed debate about the real battle of getting paid as a start-up. The debate started with a question from the floor and a husband and wife team struggling to establish a cleaning business. When I say struggling, they’ve actually got more business than they can deliver; they just can’t afford to take on more cleaners because clients won’t cough up.
It’s a typical over-trading cashflow predicament; not only an obstacle to growth but a potential killer. The cleaning firm revealed they were at their wit’s end being told 90-day payment windows were non-negotiable and when they’d tried factoring as a solution clients had objected.
‘We can’t cope without getting paid, our bank told us to try factoring but the clients hate it and we’re scared of losing them.’ Sound familiar? I’m guessing it does.
Credit then to Gavin Wheeldon, founder of Applied Language Solutions, for some cracking advice.
Don’t accept 90 days. Don’t listen if clients don’t like factoring. Don’t be afraid of losing clients. Stand up for yourself. Communicate. Tell clients you’re doing a good job for a fair price and that you need paying on your terms.
Sahar Hashemi founder of Coffee Republic also backed factoring and the general consensus was that factoring is fine; factoring companies often aren’t. The message: don’t accept the factoring company your bank pushes you to. Speak to them and communicate exactly how you want your clients dealt with.
So factor but then get on invoice discounting – where you’re advanced a percentage of an invoice but collect from clients yourself – as soon as you can.
Other helpful advice included finding someone to work one afternoon a week chasing invoices in return for a commission; offer a discount incentive for clients that pay in advance for services; or, if clients are completely immoveable, approach the bank for additional credit or debt facilities using invoices as leverage.
The overwhelming advice though was not to give in to or accept late payment – and that only you can stop it. Lobbying governments and big business to understand the needs of small businesses is all very admirable, but the reality remains that you have to stick up for yourself and negotiate terms to enable your business to prosper.
In turn, it’s you lot who have the best advice as well. Do you agree with Gavin and Sahar’s views? Please let the rest of us know by leaving your views below.
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