If you have a large client who is very tardy with payments it can put a large dent in your cashflow. Unfortunately more and more government and corporate clients are looking at extending payment terms which can place a lot of pressure on small businesses, particularly if they still don't pay by the extended date. Here are some of your options if you have large bad debtors.

Deal with it

If the client has a large account and tends to pay eventually, you may decide that you simply need to incorporate this slow payment into your cashflow management. This can often be the case if the relationship would be soured by pressing the terms and may lead to a loss of business volume that could dent profitability. There are some specialist finance products known as vendor financing which can take on your debtor's book in return for a small fee, and these can be a great option for people with large but slow-to-pay clients. 

Offer a discount for early payment

Some government departments and large companies have accounts policies that require them to make early payment if they will receive a discount for doing so. Have a look at the cost of capital and incorporate a discount on the bill for prompt payment that not only makes up for not holding the debt longer but also the fact that you won't have to spend time and energy chasing the client accounts down. 

Use a debt collection agency

If your account seems to be extremely behind, you may opt to use a debt collection agency. This can often prompt payment from even the slowest-paying debtors. While some businesses are worried that calling in a debt collection agency may ruin the relationship, this is not always the case, as often your company contact will have little contact with the accounts payable process or personnel in a large company.

In large companies, particularly those that have a complex payment system or that have merged operations, it can be all too easy for payments to have dropped off the system unintentionally. A debt collection agency has the time and energy to go through the client's accounts payable department and chase down the required payments.  

As you can see, there is a range of options for dealing with large bad debtors. Choosing the right technique can help to relieve some stress on you as small business owner and leave you free to concentrate on your business. 

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