Sage’s recent research shows the most common reasons for late payments among SMBs.
In a perfect world, all payments and invoices owed to small businesses would be settled on time, every time. Unfortunately, many factors contribute to why late payments exist. The issue is growing to be a hindrance to business growth.
Sage surveyed more than 3,000 SMBs across 11 countries to understand the global impact of late payments and the causes. We found that 1 in 10 invoices are paid late, and up to 10% of late payments are either never paid or written off as bad debt.
We know that small-and-medium size businesses have a harder time absorbing the impacts of late payments. This makes the fact that over 30% of U.S. SMBs currently experience or expect to encounter negative impacts of late payments affecting company investments and supplier and staff pay very alarmingly for the SMB landscape.
Don’t let late payments overtake your business. Here are the top 5 ways to eliminate late payments and keep the cash flowing.
- Establish terms up front. 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.
- Automate the payment process. Organizations lack a dedicated resource (13%) to chase late payments. Implementing an automated payment process like e-invoicing eliminates the need for additional manpower. Payments are made on time without prompt aside from your payments software.
- Skip the awkward conversations. The biggest barrier to chasing late payments avoiding that conversation to protect the relationship with the client (30%). This is another benefit to e-invoicing: since invoices are automatically generated and sent, you know each customer has received their invoice and knows how much they owe. There’s no need for the less-than-pleasant phone calls. Some payments service providers allow your customers to pay directly from the invoice.
- Eliminate human error. Another reason for late payments is that the customer disputes the amount owed. Automated invoices are generated without manual data, so all amounts and totals are accurate. Both you and your customers can trust the accuracy and keep the transaction moving as agreed.
- Offer digital payment methods. E-invoicing and digital direct debit payment methods have the funds transferred from your customers’ accounts to yours immediately once the customer initiates the payment. No more pending payments, returned checks, or any other delays in payment transactions.
What are your stories of dealing with late payments? Let us know in the comments below.