Prompt payment is essential to any business. Late payment is inconvenient, but also an indicator of a much larger issue. If a business falls behind on its collections, it could result in that business being put in a precarious position. An organisation that allows late payments is not taking its financial obligations seriously – and this can mean it simply won’t succeed.
According to Be Media, 97 percent of Australian businesses fail–of those, 60 percent of small businesses close the doors within the first three years of operation. There is no margin for error or for lending unwarranted credit to a customer who may have every intention of defaulting. For every payment history that falls behind, you accrue a greater risk of cash flow problems.
A crisis point, when your business needs extra capital, may not be far off, and you don’t want to be cold-calling customers trying to get them to pay on time when you’re desperate. Keep a close eye on your bottom line. You must know what it takes to tell if you’re breaking even.
There is a difference between doing a lot of work and making a lot of money—the skill comes in being more efficient and noticing your weaker points. The shortcoming may lie in using expensive suppliers, too much labour, or allowing late payments to accrue.
Any overspending risks your business and your credit report.
Identify Areas of Risk
Stay in the green by flagging areas where you could suffer the most damage. It might be looking at your invoicing system so that your customer’s debts are repaid more swiftly. You may also want to examine the types of payments you’re accepting, from credit cards to electronic transfers.
Are your payment systems outdated or preventing certain customers from settling their accounts? What programs would help you collect payment from virtually any client of any age or background?
For a small-to-medium business, accounting programs and automated invoices can drive sales, inhibit credit card issues, and prevent customers from taking advantage of your acceptance late payments. These tools will keep things in order and moving forward.
Software such as the Pay Advantage platform, identifies what payments are owed to you, offers multiple ways to accept payment and automatically follows up on late payments. The idea is to build resistance to late payments before they jeopardise your business.
Setting up direct debits help you avoid late payments by taking the money out of your client’s account on a pre-agreed date. Direct debits make it easy to take recurring payments when you work with a client over a long time.
Using better technology means fewer late payment issues will slip under your radar. Automatic payments, like direct debits, eliminate debt before it can impact your bottom line.
Our advice is to automate invoices, set and send reminders, automatically send customer emails, and break down your bottom line so that you can digest the truth about your financial performance.
If you want to be more tech-savvy, we suggest checking out our platform as a great starting point. Our technology consistently monitors your financial performance and any late payment issues.
Also, keep a close eye on your credit score as this is vital to growing your business. Keep it healthy with consistent repayments on every credit card you own. Think of your credit score the same way you think of a client’s credit and avoid late payment.