October 7, 2019Late Payments
How to deal with late payments
Dealing with late payments and unpaid invoices is one of the most common problems business owners face day-to-day.
Late payments to small businesses negatively affect their operations. They have staff to pay, equipment cost to cover and various other bills. If paid late, the demand for these costs can close a business down if they aren’t receiving what they are owed from their customers.
So how does one deal with this issue? Well, here are some tips that will help your business deal with those late payments.
Firstly let’s take a look at some numbers first…
It’s no secret that Australian small businesses are some of the most negatively affected when it comes to late payments, with an average of being paid 26.4 days late.
When you take into consideration that most business payment terms are 30 days, this leaves businesses almost 60 days of being unpaid for their products or services.
This is a major reason why so many small businesses fail every year. In fact, 82% of businesses fail because of poor cash flow.
So what can business owners do to deal with these late payments?
Here are some simple, yet effective strategies you can use to lessen your chance of a late payment.
- Negotiate an upfront payment with your customers. Before you start a job, asking for a percentage of the final cost upfront can help you keep things in order financially.
- Make late payment fees part of your terms. By stating to your customers you’ll charge a late payment fee encourages them to pay on time.
- Always discuss your terms upfront. By making it clear to your customers what your payment terms are, they won’t have any excuses when it comes to payday.
What are some procedures you could put into place?
It is always smart to have systems in place when it comes to collecting payments. Sending email reminders, follow-ups, etc can help you get paid in no time.
Ideally, automating this step is something that can really drive your business’ positive cash flow through the roof with minimal effort on your end.
Having platforms such as Pencil on your side can be a huge benefit. By doing all your invoicing, email & text reminders, collecting payment and charges late fees you can leave a lot of this working in the background while you focus on your business operations.