How To Stop Customers From Owing You

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Question: I have a fashion design and fabric retail business. I travel four times a year to source my fabrics.  My business has been growing but I am having difficulty with my cash flow. Some customers pick fabrics and order clothes but never come back or come very late to pick them up. This ties up money and sometimes the money is lost. I charge them 50% deposit as a way of commitment but it does not help much. The direct impact is that I restock less often than I want to and paying my tailors is also becoming a struggle. What can I do?

Depending on what industry you find yourself, demanding full payment upfront can be challenging. Here are some tips to help you:

1. Create a credit policy system. For instance, credit should be given to only trustworthy customers based on past transactions. Also let new customers know why they are not entitled to credit and how they can become entitled.

2. Separate selling of fabrics from actual dressmaking. This way, customers pay fully for their fabrics and credit is extended only in the dress making process.

3. Offer incentives for full payment.  Discounts, coupons for next purchase etc. can encourage your customers to pay at once.

4. Politely contact the customers and explain why they need to pay.

Under normal circumstances customers are expected to pay for services rendered. However this does not always apply. As an entrepreneur, you must bear this in mind and plan accordingly. 

Have you ever experienced a similar situation? Share your thoughts below.