Your other line of business: Bank

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Your other line of business: Bank

By Anna MaskerIn standard3rd August, 2016


Again!  The customer didn’t pay again!

It was the third month in a row that my client’s customer had some excuse as to why they couldn’t– or wouldn’t– pay.

When I looked at my client, I had to ask:  “When did you become a bank?  Because I thought you were in a completely different line of business.”

He looked confused.

I told him I wanted to start banking with him.  Because basically he offers better terms than any line of credit or credit card company– interest free loans for 3 months, with no nagging phone calls, no interest, no collections person hounding me– and no repercussions.

If you are extending terms to any of your clients– you are basically running a small side business: Bank.

It doesn’t matter if you serve the Fortune 100, who have no problem stringing you along because of bureaucracy, or  small or mid-sized companies who are often struggling with cash themselves.  What amazes me is the reluctance we get from clients to actually make collection calls, or cut them off from future shipments,  or rock the boat in any other way.

“They’re our best customer!”  they say.   Of course they are!  They know they can rely on you to fund them!

Here’s  a few things to think of to get over call resistance and collection efforts:

  • Think of how much money you have already spent on that revenue outstanding. It had to cost you something for the service you provided, which, up to the point they pay you, they are actually getting for free.  So free service and a free loan… hmm sounds like a good deal.
  • Think of the ridiculousness of having to tap your own line of credit to be their bank. This happens a lot– clients use their credit line to bridge them until receivables come in.  So basically the customer is getting both a free loan, and making you pay interest on the money you borrowed to cover their receivable.
  • You are ticking off your vendors, jeopardizing your own supply lines and relationships. Other than borrowing from your line of credit, one other source of money is pushing back payments to your vendors.  Not all of them are willing to be your bank like you are to your customers and many of them will cut you off without a second thought.
  • You are a sucker unless you take a stand. It’s ok to be tough and draw the line in the sand… and stick to it.  Many customers  have a policy NOT to pay until collections calls start coming in.  They aren’t dumb.  They know where the free money is.  Many will pay once you start paying attention and getting them to put your check in the queue.

Look, we all want to be nice guys and work with our customers, but there is a certain point where being a nice guy turns into being played for a fool.  Every business is looking for ways to stretch their cash.  Just make sure your customers aren’t using you as their personal interest-free bank.

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