At Sage, we know that late payments create unnecessary financial stress, especially for our customers with small to medium-sized businesses. If you’re not receiving payments on time, the manpower used in chasing late payments becomes a big issue. These businesses rely on funds to run day-to-day operations, pay staff and suppliers, and support future growth.
Why do late payments occur?
Surprisingly, our research didn’t shed light as to why paying companies are making late payments. Results reveal 34% of paying vendors had no reason why payments were late and 30% said the payment has been made and the transaction is simply “still pending.” Additionally, 20% say invoices are paid at certain periods, which means the business can expect payment forthcoming.
Barriers to chasing late payments
Many SMBs find it difficult to raise the late payments issue with customers for fear of harming the relationship, with over 30% noting the lack of chasing outstanding payments to protect the client relationship. Another barrier? Organizations lack a dedicated resource (13%) to chase late payments.
The good news? Businesses can address the late payments issue without impacting the customer relationship. Here are a few tips to reduce the impact:
Provide simple and easy to follow invoices
For many entrepreneurs trying to get their own business going, one of the first new challenges that presents itself is crafting the perfect invoice. If you’re wondering what information to include and where it should go on the page, or even if you’re just trying to make sure it looks professional, you can download these free easy to follow templates by clicking the box below.
Free Invoice Templates
Download the Free Invoice Template Bundle from Sage Canada and say goodbye to late payments in your organization.
- HVAC invoice template
- Construction invoice template
- Professional services invoice template
- Contractor invoice template
- Sales invoice template
- Simple invoice template
- Freelancer invoice template
- Designer invoice template
- Small business invoice template
Establish payment terms upfront
Our survey shows the most common reason given for delaying payments is that the transaction is pending or there was no reason given at all (34%). There could be a significant improvement in timely payments if you tightened up on your payment terms from the start.
Late payers are likely to be aware of the situation they cause and could be willing to pay you faster if it was a requirement for service. This helps to manage your customer’s expectations and gives them time to schedule their payment in advance.
Build the right relationships
Foster relationships with invoice recipients and make sure invoices are delivered to the right contact in charge of making payment. Better relationships also mean better communication, which is critical when it comes to getting an invoice paid!
Automatic and digital payment methods such as direct debit and e-invoicing can make payments as simple as one click for your customers and virtually eliminate the top obstacles to getting paid on time.
Digital payments that are automatically reconciled in your bank account can also give you more visibility and control of your cash flow. Since those types of payments are more reliable, you can better forecast what funds you’ll have available throughout the year, giving you the agility to adjust as needed.
Here are a few tips to ensure prompt payment and maintain cash flow.
- Make a due date or “pay by” date on your invoice – providing a deadline can be helpful to promote urgency to your customers. It also makes forecasting your company funds easier and more predictable.
- Include a space for recommendations – repeat business is the best kind of business. Providing recommendations for future services helps your customer know from an expert perspective what services may be needed down the line. As the professional, your input is valued and appreciated by clients
- Include a specific invoice number – this should be visible at the top of the invoice. It seems minor, but an invoice number makes the document easier to keep track of while exuding a subtle touch of that professionalism we were talking about.
Mastering your money
Using professional invoice templates is a great step towards properly managing your business finances.
But wouldn’t it be great if you could generate and send professional, personalized invoices from anywhere as you process orders? You could say goodbye to manually completing, saving, and sending invoices – freeing up time to work on your business instead of in it. Find out how with Sage Business Cloud Accounting.
When you create and send invoices within Accounting, you’ll also create a record of all your orders, customers and outstanding payments at the same time. No more manually entering orders, chasing lost pieces of paperwork, and stress at year-end.