The Dunedin City Council's economic development unit and three specialist companies that assist businesses to "tidy up" their debtor management have combined their money and expertise to help get invoices paid more quickly.
Council economic development manager Peter Harris said cash flow had become critical in the current economic slow-down.
"A sale is not a sale until the money is in the bank.
"We are all trying to help people survive and we are willing to share the pain to make it happen."
The unit, Protocol Credit Bureau, Be Paid Ltd and Debtworks, through its Creditbiz brand, will give 60 Dunedin businesses a 50% discount off the normal fee up to $500 ($1000 of services).
Mr Harris said there was good advice available for businesses having cash-flow problems but people might not know it was available.
"Rather than sorting it out, they will do another job which compounds the problem."
Be Paid managing director Stella Nicholson said nothing she had experienced in the past could compare with current activity levels.
Businesses which had always paid on time in the past were experiencing cash-flow problems now because they had not been paid.
"The chances are they are waiting for others to pay so they can pay.
"This sort of thing happened in the 1980s but it was nothing like this.
"People are worried about it - they are strapped for cash."
Businesses were becoming over- extended as they waited for payment and were starting to wonder if they should keep supplying to those customers, she said.
Mrs Nicholson urged businesses to rely on their "gut instinct".
If they felt they should be worried, they should take action.
Her clients were contacting her sooner about late payers and were asking for reporting-back updates more regularly.
"They are ringing me up asking for more effort because they have bills to pay.
"I have never had that before."
Many businesses had the cheques written out but sitting in a drawer.
Until a supplier phoned them asking for the money, they would not post the cheque, she said.
Chances were that if someone said "the cheque is in the mail" it had been sitting there waiting for the call from the supplier.
Asked for a reason for the change in mood, Mrs Nicholson said banks did not appear as willing to provide overdrafts or extend overdrafts to help cash flow.
"Maybe it comes back to banks being more careful.
"We often get calls from people saying they are refinancing and asking for a time extension to pay.
"They phone back and often the bank has said `no'."
If businesses were providing credit, they should know who their customer was.
In some cases, they did not know the customer.
If credit was tight, a business could switch to cash terms but if they had to offer credit, having the customer fill out a basic credit application was essential.
The application was a commitment to pay, she said.
Debtworks director David Young, also the national president of the Credit and Finance Institute, said the collection industry was considerably busier than this time last year.
There were seasonal fluctuations, but this year was beyond any previous seasonal adjustments.
"We are seeing businesses without problems ringing because they think they might have problems down the track.
"We were getting calls in January and February from clients without a ledger problem worried about what April and May would bring."
Businesses needed to take a holistic approach to the management of their own ledger.
They should not look at another company and compare their own operations.
The one big question they must answer was why they were giving credit.
The normal answer was because competitors provided credit or to increase sales.
"The correct answer is to make more money.
"If you are not making more money by providing credit, what's the point?"
Giving credit was managing risk and there were ways to minimise the risk, Mr Young said.
Some simple things included going online and looking at the electronic white pages to make sure the person was at the address and phone number they had given on an application.
Also, a supplier should walk out with the customer to their car and check it was registered, warranted and clean.
"That can tell you far more about a person than any bit of paper.
"It is a great sales pitch because they think you are involved with them and all you are doing are kicking their tyres.
"People with scruffy cars are late payers because they don't get round to it."
Businesses could also use the Insolvency and Trustee Service to see if the person was bankrupt.
At that stage, the business had still not spent one cent on credit checks, Mr Young said.
However, the greater the risk, the more time a business should spend checking backgrounds.
Businesses needed terms of trade as if they did not have those, they were stuck with the Terms of Trade Act 1908 which might not suit how a business was operating in 2009, he said.
The Act stipulated that ownership passed with possession, not payment.
Terms of trade also gave businesses an opportunity to offer the "carrot and stick approach" to payment.
They could charge penalty interest for late payment or a discount for early payment.
Also, the development of some form of credit policy was essential.
It could be as simple as phoning everyone who did not pay by the 20th of the month.
Most businesses did not have any form of policy in place and only reacted when the bank called about the size of the overdraft, Mr Young said.
Businesses could put in a review date for accounts that went past 60 or 90 days to decide whether they went to a collection agency.
Historically, small businesses relied on the owner's partner or a person in the office to chase debtors.
But if it came to a choice of paying the PAYE, GST or phoning debtors, most people would empty rubbish bins before phoning debtors, he said.
"The services we provide are 100% focused on doing the job."
Protocol Credit Bureau general manager Dene Bannister said good internal procedures could reduce the risk for business.
"Making sure you do credit checks on new customers and that you are regularly communicating with your debtors should minimise the chances of having to resort to debt collection."
Debt collection remained a core activity for Protocol but Mr Bannister and business development manager Sally Teasdale were spending increasing amounts of time on client education.
Like Mr Young, Mr Bannister advocated businesses having sound terms of trade.
Along with credit checks, those two policies could prevent cash management problems getting out of control.
Even some large businesses did not have tight terms of trade.
Client education aimed to prevent the debt having to move to a collection agency by instigating a ledger management process, he said.
Mr Harris said that although some people considered the "Get Paid" programme was moving the problem around the community, people paying their bills was a key part of keeping the local economy moving.
"If one business was struggling because of slow payers, their suppliers will probably be waiting for payment too.
"Cash oils the economy."
The selection process would favour businesses with debtors outside Dunedin so payment brought money into the city.
