What to Do About Late Invoice Payments

What to Do About Late Invoice Payments Intelligenthq

Ensuring that your invoices are paid in a timely fashion can be a constant struggle for small business managers and service providers in any context. The real problem, of course, is that issues with late payments can have knock-on effects and leave companies dealing with mounting debts and worsening cash flow concerns.

However, there are ways of increasing the likelihood that your invoices will be settled on time and various options available if late payments are damaging your business finances.

Invoice immediately

Running a business generally involves juggling a whole variety of tasks at any given moment and prioritising effectively is a constant challenge. For many businesses, this ultimately means invoices are routinely sent out a number of days or even weeks later than they might have been. Avoiding this situation and making sure that invoices are sent very soon after they are drawn up can make a big difference in reducing problems with late payments.

It’s easy to assume that a client will see the date on your invoice, immediately realise what it relates to and send a payment in good time in response. In practice, however, the date that an invoice is received goes a long way towards influencing when relevant payments are made. Very often, in fact, the terms detailed on your invoice will not be adhered to if the invoice is received late.

Timing really matters

In the context of invoicing for work done or services provided to clients, timing really does matter and to a greater extent than you might imagine. So, if you’re having trouble seeing that your invoices are paid on time, then your first priority should be making sure that you send out your invoices right away as often as possible. By doing so, you can help to speed up the entire process and give yourself a much better chance of avoiding the hassle associated with chasing up late payments. In fact, the importance of sending your invoices as immediately as you can after completing the relevant work is enormous. Not just because it initiates the payment process earlier but because the details of the work you’ve done or the services you’ve provided will be much fresher in the minds of your clients. And this ‘freshness’ really matters in this context because your clients will naturally be more inclined to quickly resolve and pay invoices relating to work they remember more vividly.

Cash flow woes

For small businesses in particular, there are instances in which late payments of invoices can become not just a source of frustration but a problem that threatens to turn cash flow issues into a critical concern. Under these circumstances, a company might ordinarily look to access a line of credit or to raise funds via some other means but traditional lenders have become famously reluctant to lend to SMEs in recent years.

Invoice finance options

Among the alternative funding options gaining traction as a means of overcoming acute cash flow concerns in the UK and elsewhere at present is invoice financing. The process essentially involves companies selling their rights to amounts of money owed on specific invoices at an agreed price. In an ideal world, no small business would ever need to make use of invoice financing options because their clients would not keep them waiting for payments any longer than agreed. However, in reality, late payment issues often arise and can, in some cases, threaten the viability of businesses across a broad range of industry sectors. When this is the case, selling invoices to raise cash immediately can become a perfectly prudent and practical course of action.

There are a number of different invoice finance options available, with invoice factoring distinct from invoice discounting in that the selling company remains responsible for ensuring that all relevant payments are received in full. Neither option requires personal financial guarantees or commitments on the part of company directors and can therefore be preferable to loans as a means of dealing with short term cash flow difficulties.

Getting good advice

If chasing late payments on invoices is becoming a serious headache for you and your business then it is well worth speaking to experts on alternative finance options and getting the advice you need to make the right choices. The issues may resolve themselves naturally but, in any case, there is no harm in being made fully aware of all the funding options available to your company in the future.