September 2, 2019Late Payments
We all know that sales are what keeps us in business, but if we don’t receive the money we are owed, sales won’t achieve anything for us.
According to ASIC statistics, having bad cash-flow is why most companies fail. To give you an precise figure, a survey undertaken by Xero showed that if invoices went unpaid, 62% of company owners did not believe they would survive for more than 3 MONTHS.
This pressure on businesses caused by late payments led to the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) launching an inquiry, which found 20% of businesses had to wait an average 60 days to be paid.
Here’s how you could fix things.
The Longer You Wait, The Harder It Gets:
The ASBFEO inquiry found business owners prioritized issuing new invoices before chasing unpaid invoices.
But what business owners don’t release is that the likelihood of recovering what you’re owed reduces the longer you leave it.
Surveys have shown the chance of collecting an outstanding amount is only..
• 69% after 90 days.
• 51% after 6 months and,
• 21% after 12 months.
Moral of this story.. Get them paying ASAP!
A structured process is vital to collecting payment.
Structure gives a solid basis for minimizing your losses as your company grows. Faster payment can bring large quantities of dollars back into your bank account.
By structuring payment collection tasks in your day-to-day, you will give yourself a much higher chance in collecting those late payments.
Send Out Quality Invoices Quickly:
Many companies agree that the sooner a customer gets an invoice, the quicker they receive payment.
Also, having a solid invoice also encourages faster payment.
Governments provide guidelines and templates for what invoices need to include.
Get Your Agreements Right:
It’s always exciting when you gain a new customer BUT always remember to formalize it.
A simple handshake won’t protect you if things don’t go to plan. There’s always a chance of a misunderstanding or things just not working out.
The result of this could be extremely costly to your business.
Agreements don’t 100% guarantee payment but it does create a record of your customer agreeing to your terms of payment.
It also helps if you need to go to a small claims court or use a collection agency to receive the payment you are owed.
If accounts remain unpaid, make sure you follow a consistent collection process.
Always be polite when first contacting. Sometimes there are genuine misunderstandings. A ‘just checking in’ email can easily sort out late payments while staying on good terms with your customer.
Also, make sure to double check your actions to make sure you have done everything right on your end.
Checking things such as; making sure that the invoice was actually sent and received, payment terms were 100% clear to the customer and that there were no mistakes they were waiting for you to correct.
If you are still struggling to collect payment from your customers, clearly explain your next actions. Inform them with the date these charges will begin before charging any late payment fees. If you send it to a collection agency or a court of small claims, notify them as they may rectify the payment to prevent your next action.
Be consistent with what you have originally communicated and take action when you say you’ll take action.
All seem a bit much?
Chasing payment is a real time consuming task. However, we have a solution that can save you hours of your time and get money back in your pocket.
Customers using our platform, Pencil, see a massive 80% of invoices paid within the first 5 days.
We automate the process for you. Businesses should be able to focus on what they do best and not be held back by chasing payments.
If you’re interested in getting your invoices paid on time click the button below for a 30 day free trial of pencil!