The quirky ways Australian small businesses are collecting late payments

1910
email

Sometimes a client will take so long to pay their bills that a business owner has no choice but to knock on the door and ask for the money – and a cup of coffee.

One in 10 Australian businesses have waited a year or more to get payment from a supplier or client, according to research published today, and payment platforms Xero and PayPal have been hearing some of the more quirky ways small business owners have taken action, from using aggressive debt collection software to dropping in unannounced for a cuppa.

These in-person approaches can go either way.

One business owner showed up after hours at a client’s house and offered to forgive half the debt in exchange for a cup of coffee.

“[The client] remains a good customer to this day, and we remind each other what a lousy coffee maker he is,” says the business owner in question.

Other attempts have been less successful.

“My wife called to collect a payment on Christmas Day, as the customer had refused to pay,” says another manager, whose is still waiting to be paid.

“The husband was a little taken aback by why we would turn up on that day.”

Xero and PayPal have collaborated in the rollout of the PayPal Express Checkout, designed to allow customers to click through invoices and process payments quicker.

Libby Roy, managing director of PayPal Australia, told SmartCompany the technology aims to cut down the significant gap between a regular invoice being sent and a customer thinking about payment, by creating a direct link to payment options.

“The average pay day is 25 days after invoice presentment,” she says.

“When it comes to closing that gap, all small businesses want is something that’s easy.”

One in 10 Australian businesses surveyed by Xero had waited a year or more to get paid, while two thirds have waited more than two months for invoices to clear.

However, having a streamlined invoicing system doesn’t guarantee all unpaid accounts will disappear. Council of Small Business Australia chief executive Peter Strong says there’s an art to approaching clients about money they owe.

“There’s a definite skill in it, and it involves using no emotion when you go in – if someone approaches this and gets emotional, it ends up getting worse,” he told SmartCompany.

Business Victoria recommends small businesses starting off client relationships with a clear letter of engagement, and then approaching debt recovery in a five step process, from a friendly reminder to a formal letter of demand. Strong adds that while a measured, planned approach should be taken, remember to be understanding.

“If it’s the first time that someone has missed a payment, your priority should be finding out why, and working out how to resolve it. It’s very important to show empathy,” he says.

Advertisement
Emma Koehn is SmartCompany's senior journalist.

We Recommend

FROM AROUND THE WEB

  • Justin Tyme

    The biggest single problem is major corporations paying 60days +. For them ist simple, they get their book of account administered offshore, Manila, Malaysia, Singapore or somewhere in India. The document transfer and checking takes a couple of days longer and they can keep their cash 30 days longer. Can you imagine the value in interest alone of an additional 30 days for someone the size of Leighton, John Holland, Rio or BHP?