A Cashflow Strategy On Steroids

We’re all aware that businesses are paying particular attention to cashflow in current times. In the majority of industries, there have been a growing number of challenges that are affecting cashflow. And every other business article I am reading is talking about yet another large company collapsing. Tough times are certainly upon most businesses.

So looking at strategies to improve cashflow is a very good idea. You can have a look our blog post on this topic for some tips about this, however, I just wanted to quickly share with you one business’ strategy.

One of our client’s suppliers has this Terms of Payment message on their invoice :

“Any outstanding amount after 7 days will incur an account keeping fee of $300.00. Failure to pay the full amount will void all warranties.”

This is on an invoice which is just a little over $1,500. So that’s about a 20% penalty for this invoice but I’ve been told this may be on invoices of smaller values too.

It would definitely be a giant incentive for their invoices to head to the very top of the payment run, however I have to wonder at what it’s doing for another aspect that is vital in business – customer relationships? I understand that this particular supplier has probably been burnt by a number of customers with non-payment, but perhaps a different tack might encourage more repeat business?

What do you think?