Late payments can obstruct the smooth running of a company, and while the overdue invoices may only be for a few clients, they can have a significant effect on the service provider. Especially for smaller businesses who have a challenging time cycling their cash, big organizations that do not pay their dues on time can create a more significant issue. Moreover, such blocked invoices also disable small companies from expanding since they are busy chasing unpaid dues even with many clients. To focus on increasing their business, SMEs need regular cash flow and avoid late payments the best they can.
If your clients are not paying their invoices on time, here are some helpful tips for you to avoid late payments and cash flow issues-
Table Of Contents
- 1 Tip #1- Do a Thorough Background Research:
- 2 Tip #2- Chase Overdue Payments Politely Yet Firmly:
- 3 Tip #3- Manage Your Late Invoices and Build Revenue Forecasts:
- 4 Tip #4- Create a Separate Vault for Contingencies:
- 5 Tip #5- Offer Early Payments Incentives and Late Payment Charges:
- 6 Tip #6- Follow the Payment Behaviour of Your Client:
- 7 About CreditQ-
Tip #1- Do a Thorough Background Research:
Before offering your services to a business, a thorough background check can help you dodge bad deals and react to critical risks to find solutions. Many resources are available where you can check the background of a company. It is best to know your client nicely before creating credit terms. Business Credit Health Check can be crucial to offer credit terms to a company according to its current creditworthiness. The commercial scores, exclusive sector, and economic analysis are some information to analyze.
Tip #2- Chase Overdue Payments Politely Yet Firmly:
Many small businesses are afraid to chase their overdue invoices out of being taken as rude or betraying their relationship with bigger firms. However, if you experience late payments from a company that was regularly paying initially, you should not get swayed by the initial habits and stick to the terms and conditions mentioned in the contract. It is best to use automated tools as chasing invoices manually is time-consuming and frustrating, especially if you have many clients.
Tip #3- Manage Your Late Invoices and Build Revenue Forecasts:
When your customers pay, your company can significantly affect your business’s cash flow. You should create and send your invoices when the client receives the service or product to get your payments on time. Make sure the generated invoice is in the format requested by the customer, complete with all the essential details. Track your invoices as soon as they become overdue and chase them to get your customers to pay. Building revenue forecasts according to the client’s terms and payment patterns is also essential to calculate risks and analyze if you will have a cash flow issue.
Tip #4- Create a Separate Vault for Contingencies:
Even after building a revenue forecast, unexpected events can occur, and you may need your credit risk management solutions. You should be prepared for such times by finding funding resources within the business, like retained profits that remain undistributed to the shareholders. The COVID-19 pandemic is an excellent example of how companies may drown in losses if they do not plan for unexpected events.
Tip #5- Offer Early Payments Incentives and Late Payment Charges:
It is common for businesses to offer incentives like discounts and reimbursements if the client clears their invoice early. Many companies also charge late payment fees from companies, and many laws allow small businesses to incur interest on overdue invoices. Make sure these terms are given in the contract that your clients have agreed upon initially.
Tip #6- Follow the Payment Behaviour of Your Client:
Whether small or large and B2C or B2B, every business can face challenges affecting how they pay you for your services and products. Monitor your client’s behavior to understand if you can have risks by continuing your business with them. Check their financial health to make the right sales pitch and avoid making transactions that can result in bad debts.
Are you looking for a service to manage overdue payments for your business? Check out CreditQ! CreditQ is a Business Credit Management and Information Platform that helps businesses with a valid GSTIN struggling with business defaulters by managing business credit and defaulters and providing credit information reports of companies based on market business transactions. Visit our website, call us at +91 7240000901, or email us for more information about our services.