different rates for credit work, what you think

FusionNet

Hi All,

as some of you are probably experiencing it is getting harder and harder to collect money. On average about 6 months even on small accounts. Due to this I was thinking of using an incentive to speed up payments and Id like your feedback.

What Im thinking of offering is two hourly rates. One if you pay on the day the work is done and one if you require 30 days credit (or 180 as most people see it!!!) Im thinking of giving a 30% reduction. As business owners would you appreciate that or find it a bad thing?

Would love to hear any other suggestions too.

Cheers,

trad

If you are not going to get paid for 180 days why offer credit? If a company needs your goods or service let them pay for it cod. Why aresuppliers ready to subsidise everyone else's business.

You should set a rate for your work or service and apply credit card rates to late payments. Too many business's are taking goods and services in the hope that you or they will be out of business in 3 to 4 months.

FusionNet

Ah some clients are great, some are suffering. With my idustry because we offer service if theres a breakdown clients only care about the problem not the cost of fixing it. Im not willing to subsidise anyone anymore, it was fine during the boom to carry from month to momth but now cashflow is king.

Also its important to note when you go into a shop, you pick up a product and hand over cash its very visible. with my line of work you get called in to look at something that went faulty or went offline, you fix it but there was no handing over of a product so I think people are always slower to pay for a service than a product transaction.

BnA

I'd agree with Trad to an extent. If someone is taking the p1ss and not paying for 180 days, you probably need to cut them off. You just have to be careful of cutting off your nose to spite your face.

Maybe, before you have to do that, you might look at your own debt collecting techniques.

Do you send out Monthly Statements ?
Are you sending them to the right people ?
How often are you following up with the outstanding debtors ?

I had a mentor in with us a few months ago showing us a few techniqies that work very well.

Say Company A owe you money.

Ring them. Talk to someone and find out when they will pay you. Take a note of who you talked to and what they said. Then, a few days BEFORE they said they would pay you, ring them up to make sure that this is still on.

So for example, you ring up and you are talking to John. He says, I'll be doing my cheque run for the month on the 25th and I'll pay you then. Then, ring John up on the 22nd and say, hello, this is Bob here, I talked to you at the start of the month. You told me we'd get a cheque on the 25th. Is that still on ?

We have found this makes a big difference to a few of the messy customers we have. If you wait untill a week after the 25th, and you haven't received anything from them and you ring them, you'll get some BS about how they forgot you, but they'll definately include you at the end of the following month. And you're back to square 1.

In business, we all have some suppliers who we know we have to pay stright away and some more who we know we can let it slide. Now, you might have every intention of paying them, but you just won't be in any rush because hey never seem in any rush with it. What you have to ask yourself is, are you (as a supplier) one of those companies who it is easy to keep on teh long finger ? If so, you need to sort it out.

RE your query on different rates for different companies, I'm not sure that it would work in a Business to Business environment.

FusionNet

I get what ye're saying alright but as I say its the perception of businesses if you provide a service they take credit as a given. I want to stop all credit going forward as it serves me no good except for the stress levels. Years ago when I offered no credit I made more money!!

My point about the different rates is say if you call me and say you have 2 hours work for me to do. You say what are my rates and I say well if you want 30 days its 110, if you pay on the day its 70, are you telling me that wouldnt work?? remember I only have a few corporate clients most are SME's owner run businesses..

I know if my phone company offfered thirty percent off the bill if I paid it the day I received it Id jusmp for it!!!

kenbrady

FusionNet wrote: »

I get what ye're saying alright but as I say its the perception of businesses if you provide a service they take credit as a given. I want to stop all credit going forward as it serves me no good except for the stress levels. Years ago when I offered no credit I made more money!!

My point about the different rates is say if you call me and say you have 2 hours work for me to do. You say what are my rates and I say well if you want 30 days its 110, if you pay on the day its 70, are you telling me that wouldnt work?? remember I only have a few corporate clients most are SME's owner run businesses..

I know if my phone company offfered thirty percent off the bill if I paid it the day I received it Id jusmp for it!!!

Your thinking is correct but your execution is wrong.
This technique is used by big companies.
Your rate never changes, as that lowers the value of your service.
But what you do is:
The rate is 100
But you get a discount of 30% if you pay on the day
15% if you pay after 30 day
5% if you pay after 45 days

FusionNet

Ya that sounds like a plan too. The only downfall is way more accounting!! But we'll see, I might just pull the credit option shortly anyways as I only have a handful of clients that respect it.. Oh the joys!! Think I should sell umbrellas!!