Why Invoices are Paid Late
Being paid late and not knowing when payments are going to come in is one of the most challenging and frustrating issues affecting businesses today.
A recent report shows that 46% of invoices are paid late and it’s clear that not being paid on time is NOT good for you and your business. 37% of FSB members have run into cash flow difficulties, 30% have been forced to use an overdraft and 20% cite a slowdown in profit growth.
You want to protect your relationship with your client, but you also want to be paid for your services. If you upset your client, you might be waving goodbye to their business.
Getting an overdue invoice settled can be a long and gruelling task. This is the major reason why businesses are paid late.
Sometimes when businesses are just starting out, it’s easy to be so keen to make a good impression and want to build lasting business relationships that they let late payments slide and over time this adds up and affects your bottom line.
When businesses enjoy the late payment of commercial debts, you are essentially acting as a creditor providing your client with a cheap form of finance with no interest charges.
Avoid this completely by making sure you cut down on waiting times and get your money as soon as possible. Be proactive rather than reactive with the solutions below:
How to Solve the Problem
1: Establish Payment Dates and Terms
It’s good practice to ensure that you always agree both payment terms and dates before starting work, preferably in a contract signed by both parties.
Even if you forgot to agree a payment date when you first made the deal, you are still protected.
2. Use a Digital Payment Portal
A big part of the reason for slow payments and non-payments are that paying methods are inconvenient. It’s a slow process and your clients will put it off.
An electronic invoicing system (payment portal) allows the process to be done digitally and quickly.
Your clients can pay the invoices pretty much as soon as they get them and if they still delay it the software alerts them of the invoice’s deadline.
Staying on the topic of making things as convenient as possible for your client, make sure they can pay how they want.
Relying on just bank transfer is slightly archaic and more modern solutions are available that ensure that the client pays such as Apple Pay and Google Pay.
3. Create Clear and Concise Invoices
Your invoices must be clear. If customers must decode what the invoice is for or what the due date is, delays will always occur.
Keep it simple. Dates, purchase order numbers and identification numbers.
After that, fill in the essential information such as products and amounts. Create better and comprehensive invoices and you will get paid faster.
4. Send Prompt Invoices
Stay at the forefront of your client’s mind. Prepare and send your invoices as soon as possible.
If you are in contact with the business person via text, notify them that you have sent your invoice.
Busy people sometimes need a gentle nudge in the direction to give you priority.
Once you have sent out the product or completed your service, send the invoice as soon as possible. Delaying the invoice implies that the payment can wait.
And we don’t want that.
5. Find the Right Person
Make sure you’re engaging the right person within your client’s organization.
When working for a larger company you may not have any contact with the person who controls the wallet.
Make sure the right department receives the invoice by speaking to the business person you work with and ask who is responsible for payments.
Once you know who to go to, send invoices to that person directly and promptly (see No. 4 for a reminder).
Late unpaid invoices are a common challenge and you will undoubtedly come across customers unwilling to pay immediately. However, there are steps you can follow to ensure that the number of clients are reduced.
Invevo has created a credit management platform that allows you to create automated workflows that will automatically send out these messages through any communication channel you prefer. With the Invevo Customer Portal, your clients can pay you directly through their preferred method.
Get paid faster with Invevo and let’s bring down that number of 46% of invoices being paid late to 0%.
Visit Invevo.com to learn more