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Your business is only as strong as your cash flow situation. It doesn’t matter how good a product you have, how happy your customers are or how clever your marketing is. If you don’t have enough money coming in to pay your employees and keep the lights on, then it’s not sustainable.
Your cash flow is entirely dependent on getting in the funds you're owed for the products and services you have delivered. Whilst late-paying clients and overdue invoices are a feature of business, if you don’t have a process in place for effectively chasing slow-paying clients, then you’re asking for cash flow problems.
Chasing unpaid invoices is a headache for business owners everywhere. Australian companies reported spending as much as a day a week chasing invoices that are past the due date. In a year, that adds up to almost 2 months, time that could be invested in improving and growing those businesses.
Here are a few simple tips to win back some of that valuable time.
In order to make sure invoices are paid, ensure your clients know the terms from the outset. Don’t feel like you have to pick 60 or 90 day payment terms just because it’s expected of you.
Set payment terms that work for you and make them clear and easy to read on the invoice. Along with the invoice number, clearly list them in simple language.
If it works for you and your cash flow situation, consider a 5% discount for paying an invoice within 7 or 14 days. You could also consider a similar penalty for late payment. For example, an additional 5% after a certain number of days overdue. This needs to be done with care, there is potential for souring relationships with valuable clients.
Invoicing software such as Xero and MYOB not only automate your bookkeeping but also issue scheduled payment reminder emails to your debtors when payment is due. They'll chase for you when the payment is late and they come with ready-to-go email templates to reduce admin even further.
Understand that late payments and chasing clients is part of doing business. Your debtors are doing their best to manage their own cash flow and you don’t know what’s going on behind the scenes.
Remain professional and polite and ensure you don’t jeopardise important relationships and future orders. Don’t forget to thank them when you receive payment, no matter how late the outstanding invoice.
Send an advanced reminder a couple of days before. Email again on the day it’s due and follow up the next day with a phone call. As they’re juggling their own cash flow, they’ll probably appreciate the heads up.
Make sure you get on top of your credit control and collections and don’t let the issue escalate.
You delivered your end of the bargain. You supplied a product or service when it was required and you deserve to be paid. There is no reason to feel like a pest for chasing. Asking for money is part of business and they’re the ones who should feel bad for not paying on time.
Do the companies you’re doing business with have a bad reputation or a history of non-payment. Research online, ask around. What you don’t want to do is end up in a situation where you’re considering involving a collection agency or legal action.
If you're finding that cash flow issues are holding you back, a line of credit from Waddle could be the solution. Our innovative platform seamlessly connects with leading accountancy platforms to offer businesses a modern form of invoice finance.
After connecting with Waddle, we'll present you with a potential limit based on real invoice values. Following a credit check and approval, you'll be able to select which customers you want to nominate for funding and watch as your limit increases. As new invoices are raised and paid in your accounting software, that limit will update in real-time. Invoice payments from your customers repay your loan balance.
And thanks to two-way data sharing with the accounting platforms, time-consuming admin is a thing of the past as reconciliations take minutes, not days.