5 Tips to Ensure Your Business Gets Paid

 

By: The Export-Import Bank of the United States

According to a U.S. Bank study, “roughly 82 percent of small businesses actually fail due to inefficient management of cash flow.”  One of the catalysts for inefficient cash flow is outstanding invoices, which continues to be a major pain point for small businesses that try to remain financially healthy. Costs associated with late payments—such as interest costs or legal fees—must be avoided, and when domestic business turns into foreign business, collecting payment can be much harder, so we’ve identified some tips below to ensure your business gets paid going forward.

1. Develop a Systematic Payment process

It’s critical to set up an easy-to-use payment process system to allow your customers to receive automatic notifications, emails and alerts. For example, if a due date is coming soon, an email can be sent out automatically to the buyer or an alert can be sent to the exporter notifying them to call the buyer. Calling has served as a great customer service technique because it allows the exporter to establish a more personal relationship with the buyer.

2. Incentivize customers

As you start to build a relationship with your foreign buyer, it may be wise to incentivize a customer to pay earlier than the due date by providing a small discount on the total invoice price.

 3. Communicate with your company

An exporter’s credit management process needs to be understood by everyone in the organization because there may be times when other internal departments play a part in collecting the payment. For example, an exporter’s sales group may communicate with the client more than the finance department, so being able to communicate, educate and enforce the payment process from all departments may help the exporter collect final payment.

 4. Document, document, document!

Make sure there is an efficient document management system when collecting invoices (especially the signed invoices) and other payment conditions/notices. Each invoice must clearly state terms and conditions, but before sending out an invoice, have a lawyer review the initial invoice template with stated terms and conditions (and if modifications need to be made, have it reviewed every time for consistency).

5. Research, research, research!

Finding out information about a foreign buyer may be difficult, therefore, leveraging your relationship with the U.S. Department of Commerce local offices or your local trade association may help when doing your research on whether or not the potential foreing buyer is in financial good standing. Local credit bureaus or local Chambers of Commerce groups may also be avialable to provide information on foreign buyers and they also may have industry background data on payment tendencies (such as average days sales outstanding). Finally, visiting the foreign buyer in their home country may give an exporter a better idea of whom they are doing business with and helps to establish better relations.

EXIM Bank offers export credit insurance, which helps the exporter mitigate the risk of foreign buyers not able to pay. With export credit insurance, EXIM Bank will cover up to 95 percent of the invoice and, in addition, will vet potential buyers to ensure they are in good financial standing. For more information on export credit insurance, click on this link to set up a free consultation with an EXIM Bank specialist in your local area!

Join John Brislin from the Seattle Regional EXIM Bank at the “How to find customers outside the U.S.” seminar to learn more about how to get paid at Biz Fair on September 30.

Buyer Beware: 6 Things to Ask the Seller for When Buying a Business

By: Rose Gundersen, Small Business Liaison with WA State Department of Labor & Industries

Did you know when you buy an existing business — or a part of one — you assume the workers’ compensation claim liabilities of that business? It’s true. The new business owner inherits the claim responsibilities and their impact on premium rates.

How to protect yourself
To uncover potential hidden future expenses and risks, ask the seller to disclose the following 6 items before you buy a business. (This information isn’t usually included in financial documents and L&I can only disclose it to the current business owner, not to a potential buyer.)

1. Injury and Cost Profile: This 1-page report covers a 5-year history of workers’ compensation and injury data for the business, including:

  • Premiums which may include savings from a Claim-Free Discount or higher rates due to time-loss or disability claims.
  • Total number of claims per year.
  • Experience factor (over 1.0 means higher rates).
  • Claims-Free Discount history.
  • Top 5 types of injuries specific to the industry and the injury types incurred by the business.

2. Injury Report: This report shows the claim expenses incurred by the business without revealing identifiable information such as the injured worker’s name or the claim number. Claim expense categories include medical, time-loss, partial permanent disability, pension, and more.

3. Estimated Future Rate Projection: This predicts the business’s future experience factor and premium expenses, assuming that the business data remains unchanged.

4. Safety and Health Consultation Report: The business’s workplace safety culture is an intangible asset or risk that you’ll inherit as a buyer. Scheduling a no-cost, risk-free L&I safety consultation will help you assess this culture and evaluate whether it is an asset or a risk. The consultation includes a walk-through visit to the worksite to look for workplace hazards and an evaluation of the Accident Prevention Program. The business can’t be fined as a result of the consultation. Correcting serious hazards, however, is required with no financial penalties.

5. Occupational Safety and Health Act (OSHA) Log Records: Businesses with 11 or more employees may be required to record workplace injuries and illnesses on an OSHA 300 log (OSHA.gov).Reviewing these logs will inform you of hazards and the effectiveness of workplace health and safety programs. (The business must keep these reports on site for 5 years.)

6. Risk Management Consultation: This free consultation provides a review of the business’s injury history and a step-by-step plan with best practices to help control costs. If you plan to proceed with the purchase after learning the injury history and safety culture, a risk management consultation is an excellent mitigation step.

Partial business purchases
Even if you purchase only a part of a business, you can inherit the seller’s workers’ compensation liabilities. For example, if you bought a customer list, inventory or other partial assets and employees working in those reported risk classifications were injured on the job, you could potentially assume the claim liability.

Example of potential impact
To better understand workers’ compensation rates, remember that:

  1. The risk class reflects the overall loss history of each industry.
  2. The experience factor reflects the loss history of the business.
  3. A claim affects a business’s experience factor for 3 years, but your rate won’t be affected for 2-3 years after the injury date.
  4. An experience factor above 1.0 means more claim liability than average for that industry. An experience factor below 1.0 means less claim liability than average for that industry.

Assuming 10 full-time employees working 480 hours per quarter, here is an example of how various experience factors could affect the annual premium you’ll pay.

Table showing how a business's experience factor affects workers' compensation premium rates. Row 1: Telephone clerks with a risk class base rate of $.1569/hour will cost $3,012 at a 1.0 experience factor, $2,711 at a 0.9 experience factor, and $6,025 at a 2.0 experience factor. Row 2: Roofing work with a risk class base rate of $7.6753/hour will cost $147,366 at a 1.0 experience factor, $132,629 at a 0.9 experience factor, and $294,732 at a 2.0 experience factor.

More resources
If you’d like to learn more about ways to protect yourself and manage premium costs for your business, visit www.Lni.wa.gov/ControlMyCosts or our Help for Small Business web page.