If slow-paying customers are keeping your business in the red, it’s time to invest in new technology to get back on track.
Cash flow is king for a small business with bills to pay, yet many don’t stop to think about why they’ve got so many unpaid invoices and their true impact on the business.
It’s more than just scrounging to pay your own monthly bills – your slow-paying customers can actually cost you money if you’re paying extra interest on your credit cards, overdraft or loans because you don’t have that payment in your pocket.
If you’re working hard but don’t seem to be getting anywhere, perhaps it’s time to revamp the way you issue invoices and chase them up.
It’s amazing how slow some small businesses are to issue invoices – disorganised tradespeople who make house calls are great examples. Some will write you a paper invoice on the spot, or occasionally carry a mobile EFTPOS machine, but others seem to put off doing their paperwork as long as possible.
They can take weeks to send you an invoice and then even longer to check whether you’ve actually paid – all the while wondering why they’re running short on cash even though they’ve been working flat out.
If this sounds like your business then it might be time to step up from your shoebox accounting methods.
You’ll find a range of smartphone apps which let you generate invoices on the spot, emailing them to the customer or perhaps sending them to your portable printer.
Many cloud-based accounting packages also let you generate invoices on the road from your mobile device, rather than waiting until you get back to your computer.
The sooner you send your customer an invoice, the sooner they can pay it – it sounds like common sense but so many small businesses treat their finances as an afterthought.
Upgrading to an electronic invoicing system doesn’t just let you issue invoices more quickly, it can also automatically bring outstanding invoices to your attention – so you know when to start chasing people.
If this new system means you’ve got more money at hand to pay your own bills, rather than going into the red, then it should pay for itself quickly.
A clear view of your invoice history also makes it easier to sort out payment issues with disorganised customers who pay in dribs and drabs, making it difficult to reconcile their payments with your invoices.
You shouldn’t need to waste time helping your customers sort out their own finances.
Of course, sometimes big businesses deliberately drag their heels on paying invoices from small suppliers, to improve their own cash flow at your expense.
They might think that they’re a customer you can’t afford to lose, but if you’ve got your finances in order it’s easier to confront them over outstanding payments.
Revamping your finances can also offer insight into your business, making it clear which are your most important and lucrative customers. It’s not always the ones you’d think, perhaps some of those difficult customers are actually more trouble than they’re worth and you should be focusing your efforts elsewhere.
It’s hard to abandon your shoebox accounting methods, even when you know that they’re holding you back, but if unpaid invoices are really hurting your business then it might be time to make the leap.