Question

Giving customers time to pay their bill generates more sales. But when a recession hits, they may have trouble making payments. If you have businesses as clients, they may have slow-paying customers, and that means they will be slow to pay you. That is what happened to a company that offered a discount card as its primary product. The owner estimated that 50 percent of the firm's customers—other small businesses—were behind in paying what they owed. The owner needed those customers to keep his business operating, so he was hesitant to demand payment on past due accounts.

1. Should a small business owner push customers to pay when times are tough? Why or why not?
2. What problems do you think a business services company might have when is customers do not pay?

Answer 1

1. A compromise should be reached.

In the recession, the other small businesses are suffering including the company in question. If the owner pushes the customers to pay their bills, when the recession ends they may move to other vendors which would have made demanding money from them in the recession a myopic and damaging move.

The business however, also has bills to pay and so needs money to maintain operations as well. A compromise needs to be reached. The owner should contact the other businesses still owing and negotiate with them to pay a certain portion of what they owe with the rest coming later.

This could give the owner enough to keep the business running whilst maintaining the loyalty of his customers.

2. Problems that a business services company could have if customers do not pay include;

• Inability to pay staff.
• Inability to pay utilities like electricity.
• Inability to pay rent and other expenses.
• Increased risk of debt default.
• Growth of company suffers.