3 ways to reduce the stress of late payment
The late payment of invoices is creating stress-related problems amongst small business owners, a survey has found.
Juno, the digital payments platform, surveyed 500 small business owners in the UK and found that 63% claimed they were suffering from stress, anxiety and/or depression because of cash flow issues caused by late payments.
A further two in 10 businesses said they were at risk of bankruptcy or business closure. As well as this, one in 10 is thinking of making – or have already made – redundancies.
The sheer scale of late payment was also made clear by the research, which found 68% of businesses with under 50 employees regularly experience late payment, and 62% spend time each week chasing overdue invoices. Separate research from Tide found the average SME is spending a shocking one and a half hours each day chasing outstanding invoices.
What can you do?
If you’re finding the strain of late payment difficult, whether on your business or mentally, there are things you can do to streamline your credit control procedures and improve performance.
An interesting finding of the research is that a large proportion of late payment is due to reasons which could be avoided altogether if efficient credit control processes were in place.
For example, the survey revealed 26% of businesses pay late because they are disorganised and forgetful. A further 21% said it’s due to poor (and slow) internal processes.
By maintaining contact with customers before invoices are due and having a clear strategy in place, it could help to keep your invoices front of mind and reduce the risk of late payment.
While our blog contains a number of articles with different tips that apply at each stage of the order-to-collections process, here are three fundamental ways to improve your credit control:
1. Set out (and stick to) a clear strategy
By clearly setting out a day-by-day strategy from the moment the order is placed until the invoice is paid, your accounts receivables team (or those responsible for credit control) can adopt co-ordinated and professional credit control procedures that could reduce the threat of late payment.
See our handy timeline to learn how a structured approach could help your business get paid more promptly, by keeping in touch with customers throughout the credit period.
2. Digitise manual processes
Although the research suggests customers often pay late because of their own poor or slow processes, the same can be true of the businesses which themselves are owed money.
So, look at where you could invest in more efficient software to improve collection times.
For example, you could upgrade your accounting software, or automate your invoicing and reminders throughout the credit period.
This will give you better visibility over what is owed and when, remind customers when invoices are due, reduce payment delays and ultimately improve your cash flow.
3. Outsource the task to the experts
If you’re finding the task of credit management overwhelming, you lack the resource in-house or regular late payment is causing you stress, you could benefit from outsourcing the task.
A specialist credit control agency can take on the responsibility for you. This allows you to spend your time focusing on growing your business, safe in the knowledge that your credit management is in the hands of experts.
Using their extensive expertise and experience they can often reduce the wait for payment and improve cash flow.