Feeling the sting of incredibly overdue invoices?
If so, you wouldn’t be alone. According to a recent study, one out of every three businesses report that roughly 20% of their accounts receivables are more than 90 days overdue. The survey—which focused on B2B businesses in the United States, Mexico, Canada and Brazil—also revealed that nearly 95% of businesses had experienced late invoice payments within the last 12 months.
Altogether, these findings have huge cash flow implications.
Broadly speaking, when businesses complete projects and deliver services, many of them are unable to reap the fruits of their labor, so to speak, for quite some time. Instead, they sit back passively and imagine dust collecting on their unpaid invoices. Unfortunately, when the cash spigot runs dry, businesses are unable to invest in new opportunities, develop new products and tap into new markets.
But the good news is that while you can’t force your clients to put checks in the mail, you can take proactive steps to keep your cash flow running smoothly. Those steps could be as simple as changing the way you approach invoicing altogether.
If you find yourself waiting on outstanding invoices, consider offering favorable payment terms to clients who settle their bills early. For example, you can offer a 5% discount to customers who pay their bills within 10 days of receiving them. At the very least, such favorable terms should encourage a few clients to expedite their payments.
And instead of waiting until the end of the month to send out invoices, consider billing clients the moment you finish working on a project. That way, you should accelerate payment by at least a couple of weeks.
Better yet, you can use an invoice financing service like Fundbox to advance payments on your outstanding invoices. Fundbox gives you the peace of mind that comes with knowing you’ve always got access to the cash you’re owed right when you need it. Rather than repeatedly asking your clients where their payments are, you can use Fundbox to easily clear those invoices the moment you need cash. You then have 12 weeks to repay the advance, plus a small fee.
As the study indicates, it’s certainly not uncommon for businesses to routinely deal with unpaid invoices that are long overdue. But rather than letting unpaid bills cripple your business, take action. In doing so, you can thwart potential cash flow problems before they occur—and grow your business as a result.