We know that late payments create unnecessary financial stress, especially for small to medium-sized businesses. You rely on cash flow to run day-to-day operations, pay staff and suppliers, and support future growth. If you’re not receiving payments on time, those activities are negatively impacted. And the time spent chasing late payments becomes a big issue.
A recent Sage study paints a clear picture of the impact of late payments on businesses:
- Over 30% of SMBs currently experience or expect to experience negative impacts of late payments that affect company investments, supplier and staff pay
- 10% of late payments are written off as bad debt
- 13% of invoice payments to SMBs are late
- An average of 15 days a year are spent chasing late payments.
Many businesses are reluctant to raise the issue of late payments with customers for fear of harming the relationship. Another barrier? Organizations lack the dedicated resources to chase late payments.
The good news? Businesses can address the late payments issue without impacting the customer relationship. Here are a few tips to get your invoices paid faster:
Establish payment terms up front. The most common reason given for delaying payments is that the transaction is pending, or payers gave no reason given at all for late payment. There can be a significant improvement in timely payments if you better define your payment terms from the start. This helps to manage expectations and gives your customers time to schedule payments in advance.
Build the right relationships. Foster relationships with invoice recipients and make sure invoices are delivered to the person in charge of making payment. Better relationships also mean better communication, which is critical when it comes to getting an invoice paid.
Use automation. Automatic and digital payment methods such as direct debit and e-invoicing can make payments as simple as one click for your customers and virtually eliminate the top obstacles to getting paid on time.
Digital payments that are automatically reconciled in your bank account can also give you more visibility and control of your cash flow. Since those types of payments are more reliable, you can better forecast what funds you’ll have available throughout the year, giving you the agility to adjust as needed.
At MicroAccounting, we are passionate about supporting business builders. We would love the opportunity to talk with you about our robust accounting software solutions that provide the flexibility and control you need. Our solutions mean you can spend more time focused on growing your business and less time worrying about when the money will come in.
Want a better understanding of late payments and the potential impact on your business? Download the complete Sage study The Domino Effect: the impact of late payments.