This article first appeared June 22, 2012.
With warnings of a second global financial crisis and consumers at home who refuse to part with their cash, it may seem like hard times are ahead for Australian small businesses.
Sadly, it appears that SMEs haven’t exactly had much respite since the first GFC. Recent figures released by accountancy firm Taylor Woodings show that company collapses are up 13.6% on the same point last year.
These figures, and latest turmoil in Europe, shouldn’t cause start-ups to panic – indeed, there are very positive factors such as the relative strength of the Australian economy and the ease of starting up – but it is perhaps more important than ever to avoid making potentially business-wrecking mistakes.
We’ve spoken to the experts to compile the 10 mistakes your business can’t afford to make in the current climate. Don’t say we didn’t warn you.
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1. Late payment complacency
You don’t have to be a rocket scientist, or even a rocket-selling entrepreneur, to realise that the rise in insolvencies is partially linked to the growing problem of late payment.
According to Dun & Bradstreet, two thirds of businesses take longer than the standard 30 day-period to settle their bills. The national average payment time on invoices has risen to 53.4 days and it doesn’t look like improving any time soon.
If you are owed money, don’t be afraid to chase it. Set clear payment terms and hit the phones as soon as they are breached. Keep the calls going until you get paid. Good customers won’t desert your business if you demand to be paid – only the cashflow-destroying ones.
If you are the debtor, try to negotiate favourable terms before it gets ugly. But also realise your place in the supply chain – it’s likely that your tardiness will impact other small businesses.