15 February 2018
What exactly does a late payment cost your business?
Waiting, waiting, waiting. Time creeps by when you are waiting for your money. But a late payment costs your business not only a bundle of energy, but even more. Time to stop and take a look at a possible solution.
1 Time, time and more timeMake sure there can be no doubt as to the consequences of a late payment
Customers who exceed the payment deadline have to be sent a reminder. Annoying at best, as not everyone responds immediately. Moreover, you often have to think up a polite way to remind your customers to pay. That, too, costs time that you could better spend on other things.
Is this the third time you have had to send your customer a reminder? At this stage, you can begin to charge reminder fees. You are well advised to include a provision for this in your general terms and conditions which you hand over to all your customers before beginning to work with them. That way, your customer knows what to expect and there can be no dispute later over the consequences of late payment.
With one negligent client, the above is doable, but if your company is dealing with several late payers, that will take up a fair bit of time. If you ultimately have to seek advice and assistance from a collections agency to get your money... Valuable time that you could be investing in your business.
2 Stress and a customer relationship at riskTip: check the creditworthiness of your new customer relations before you sign any agreement
It is natural that you want to be compensated for your work, and find it annoying if you have to wait a long time for that compensation. You are certainly not the first entrepreneur who experiences a lot of stress from (unpaid) invoices, which can have an impact on your performance and possibly on your work.
This can really became a burden if it affects your customers too, who can sometimes feel cornered. If there are two things that you could easily do without in your company, those are a customer relationship that is at risk, and stress that delays the growth of the business.
For this reason we advise entrepreneurs such as yourself to check out the creditworthiness of your new customers before you sign any agreement.
3 Negative cash flow
You already know that cash flow partly determines the financial soundness of your business. Quite a few companies have been defeated by negative cash flow gaining the upper hand. Certainly if your company is about to take out a loan to invest in the business, you have to be careful. Credit providers look carefully at the cash flow of a company in order to determine how much they will lend.
In practice, your cash flow stands and falls by virtue of the expenditures you make and on the timely or untimely payment by your customers. The first point you have more or less control over, but the second is a bit more difficult.
You can optimize the timely receipt of payments by opting for an automated invoicing process. So opt for an online tool that can speed up the preparation and sending out of invoices.