Correcting The Behavior
Josh and his wife own a bakery. They have a 30-day payment period, and now they're up to two months behind in payments. How should they handle it?
QUESTION: Josh in San Antonio and his wife own a bakery. They have an account to provide wholesale pastries to clients. They have a 30-day payment period, and now they’re up to two months behind in payments. How should they handle it?
ANSWER: I think what you’ve got to do is call the guy who owns the place and go have a meeting with him. The purpose of the meeting is two things. You don’t have to be abusive or anything. All you have to do is say, “I’m a small business guy. I need your help. You’re a big customer and an important customer to us, but we can’t operate on these terms anymore. So number one, I’ve got to collect this bill that’s behind, and number two, you and I are going to have to come to agreement that when I bill you, you pay me within 10 days. If you can’t do that, then what’s going to happen is we’re going to have to go on a cash basis with you, so when you pick up the order, you just pay for it. Or you’ll just have to get your stuff someplace else. I don’t want to do that. I want to serve you. We’re the best bakery. You’re the best whatever. We want to work with you, but I am not big enough to be your bank, and I’ve got to have your help.” Approach it with that, and if you’ll do that in person, probably what’s going on is he’s also a small business guy and he’s disorganized. All of a sudden, even if he doesn’t get organized, you’re going to start to be toward the top because he knows you’re going to be sitting in his office again. About the third time you sit in his office, it’s to end the relationship and you just move on. It’s better to have no business than bad business.
You go through a process to cut it. You try to correct the behavior, and if you can’t correct the behavior, you’re forced to cut it by his misbehavior. Go sit down and have a cup of coffee with him. What I try to do is create a business model where there are no collections. I try not to have receivables. That’s my first step. Cash on the barrelhead is a good plan in a small business. We need the money. We’re not big enough to bank everybody.