There are two types of business owners when a customer asks for more time to pay.

The first is the "emotional" business owner.

He decides based on the relationship, the excuse given, and how he feels that day.

His thought process:

“This customer has supported me for years.”

“He is going through a difficult time.”

“He promised to pay next week.”

“I don’t want to spoil the relationship.”

So he gives another extension, then another. Every deadline becomes negotiable, every missed promise starts a fresh discussion.

This is the type of business owner who ends up with a lot of bad debt.

The second is the "systems" business owner.

He may still grant an extension. But the decision is controlled by a fixed process, rather than emotion.

7 days, no payment: follow up.

Another 7 days, no payment: formal demand.

Still no payment: escalate to legal recovery.

The system moves regardless of whether the debtor is a friend, a long-standing customer, or someone with a convincing story.

Soon, every one of this guy's customers understands that he takes payment seriously.

The first business owner's style is to react to defaults, while the second business owner controls them.

This makes all the difference when it comes to managing bad debt.

Rudi Cheu (rudi@rulecolaw.com) is a content creator under the Newswav Creator programme, where you get to express yourself, be a citizen journalist, and at the same time monetize your content & reach millions of users on Newswav. Log in to creator.newswav.com and become a Newswav Creator now!

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