The best customer by sales may cost more than you think

The sales report tells only one story

Imagine a customer supplies a large share of your work, but its invoices need repeated corrections, long payment follow-ups and frequent management meetings. The sales figure looks strong. The work required to turn those sales into cash is less visible.

Examine the account's costs before deciding that more of the same work is automatically desirable. This is an internal commercial review, not a calculation of charges you can simply add to the customer's invoice.

Record the extra tasks for a defined period

Track time spent on repeated account queries, additional claim administration and payment chasing. Distinguish ordinary service from unusual work caused by this account. Use a practical estimate where exact records are unavailable and label it.

Do not count the same staff cost again if it is already included in another profitability measure. Ask your accountant how the internal comparison should handle shared wages and overheads.

Identify the cash consequences separately

Look at when the business pays wages and suppliers for this customer's work and when receipts arrive. Record actual financing charges where relevant. Keep the opportunity cost of using cash separate from a bank charge actually incurred.

business.gov.au notes that offering customer credit carries cash-flow risk. Measuring the account's own timing helps turn that general risk into information useful for this relationship.

Source: business.gov.au: Payment terms

Avoid a false precision trap

A rough but explained estimate can reveal a problem without pretending every hour is known. Show the assumptions and check whether the conclusion changes materially under a reasonable alternative.

Do not label all management time as wasted or assume the customer alone caused every delay. Some extra work may come from your own billing process, an unusually complex project or unclear responsibilities that can be improved.

Use the findings in future decisions

Consider whether a better submission process, clearer scope, different lawful terms or a different mix of future work would improve the account. Discuss proposed changes before agreeing new commitments.

Avoid retrospectively imposing an administration fee or interest simply because the review identified a cost. Any amount claimed from the customer needs its own contractual or legal basis and appropriate advice where uncertain.

Judge improvement by cash and effort

After making agreed changes, compare the next period using the same method. Check whether payment reliability and the effort required to achieve it have improved together.

If the outstanding account is placing the business under pressure, CRP can discuss the debt position. Bring the invoices and payment history through Report a Debt. Keep the internal account-cost review alongside them as context, not as proof of a new recoverable charge.