Today I am working on financials for my business and I have an issue with several delinquent accounts. The overdue balances range from $45 to $60. The amounts aren’t huge by any means, but as with any small business, cash flow is everything. During the times of a prosperous economy, running a small business meant building and living by the cash flow. Now with the economy in not so hot shape, the cash flow is even more important. With there seemingly being less dollars to go around, it seems every business, government, or money collecting agency is stepping up efforts to collect those hard-earned dollars. Small business is no exception.
Let’s use some numbers to illustrate an example of the problem. The following is based on a real situation with smaller round numbers used for easier math. June billing for hours and services totaled $400. Monthly expenses average $300. That leaves a “profit” margin of $100. I employ a policy of a $200 per month cushion before I can take money out of the company. This helps cover unexpected expenses. Translation – I worked for free in June. There are $185 in delinquent accounts for June leaving paid receipts at $215.
With only $215 to pay $300 in bills that leaves me with a deficit of $85. Who do I not pay? The answer: I have to pay all of my bills. In order for my paying customers to continue to receive their services I must pay my bills whether it is at a loss or not. Like most small businesses, my business doesn’t have tens of thousands of dollars sitting around so you can be late on your bill.
In trying to collect on delinquent accounts I’ve heard a number of excuses and pleas. I am sure many of my fellow small business owners have heard many of the same stories, but for those of you that don’t deal with this on a constant basis, I want to share a few of them with you.
We’re a small business and cash is tight right now with the economy the way it is.
I feel your pain. Literally. You are contributing to my pain. Forgive me as I don’t have a lot of sympathy. It isn’t fair to push your burdens off on to other businesses.
Can you cut me a break or work with us at all?
I got asked this by an agency that I had already given a 50% discount to before the project began. I couldn’t believe it. I had already lowered the bill from $120 to $60. There wasn’t that much more I could do. Small businesses aren’t charities. Just because you often get to deal directly with the owners and they are often willing to work with you on pricing more than a large company doesn’t mean you can take advantage of that.
I haven’t been able to pay any of my bills recently, you aren’t the only one I owe.
Is owing more than just me supposed to make me feel better? All this says to me is that you shouldn’t be in business. Oh, by the way, should we be having this conversation while leaning against the $3000 vinyl wrap you just put on your truck? I wouldn’t want to it to get damaged since you just spent all of the money you don’t have.
Why does it matter? You don’t pay for the services you charge me for.
WRONG. I have to pay for my servers and the costs related to their up keep. I also have to pay bills for storage and bandwidth. That 99.9% up time you enjoy on your website doesn’t come for free. That remote assistance utility that allows me to add desktop shortcuts for you from anywhere in the world isn’t free either.
You’re not going to suspend my service for not paying are you?
Yes I am. If you aren’t going to pay for it, I’m not going to give it to you. These are pretty common expectations. Utility companies don’t give you electricity or phone when you don’t pay for it. Pay your bill and I will gladly turn it back on.
Year after year I deal with the same problems. There are always people that want something for nothing. There are people that don’t seem to understand what it actually takes to run a business and what it means to not pay bills. It used to frustrate me, but anymore it is just an annoyance that occasionally provides me an opportunity to rant.
Moral of the Story: If you are going to support and use small business, pay them. Cash flow is the only way a small business can stay in business.