But there can be drawbacks. Big corporations not used to the same cash flow problems that growing businesses struggle will usually demand to do business on their terms.
While working with a big player at least means you don’t have to worry so much about not getting paid at all, FDs tell us that these difficult terms can play havoc with your cash flow and also make it more difficult to pay your own suppliers on time.
Business groups have continually raised concerns about the problem and the Government looks set to take some level of action but it seems that lengthy payment terms are more of a cultural problem than something which can be tackled with a dab of bureaucracy.
So what’s the solution? We want to hear from you, entrepreneurial FDs, about how you’ve handled the problem.
Sometimes there will be merit in explaining to clients that, as a smaller business, such long payment terms can make it more difficult for you to operate. But at the same time suggesting you’re the kind of business that experiences cash flow difficulty can set alarm bells ringing. What’s the best way to negotiate payment terms with clients?
If you decide to go ahead with the deal, it’s important to mitigate the risks and be flexible enough to accommodate the longer terms – how can this be done most effectively?
If things are difficult or the terms are particularly onerous, there has to come a point when you walk away – when does the prestige of a big-name client become outweighed by the difficulty of the relationship?
We want to hear your thoughts – comment in the box below this article to let us know how you’ve coped with the challenges.
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