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Credit Squeeze Bites

Publish date 13 Oct 2016

Amid growing concern about late invoice payment, online debtor management company IODM has urged small businesses to do due diligence before signing contracts. 
IODM managing director Damian Arena said a company analysis indicated that for every $50,000 in outstanding invoices, there was a hidden cost of $6250 covering foregone bank interest, overdraft rates and lost business opportunities. 

"Have a credit policy and stick to it. Don't just accept payment terms bumping up to 60 or 90 days," he said. Mr Arena said offering a discount for prompt payment also was worth considering. 

"Getting the cash flowing more readily more than compensates for the marginal lost revenue in offering the discount," he said. 

Mr Arena said due diligence on new customers and clients was essential. "Prevention is a good start. Examine their credit and trading history. How long have they been in business? How old are creditors and is there any legal action pending?"

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