Imagine if your customers paid on time and the money due on invoices was already in your bank account – is this something that can be achieved and managed effectively?
Overdue invoices is a notoriously common factor of why businesses suffer from cash flow crunches and can be the catalyst for business survival. Any business of any size will experience cash flow disruptions if invoices are unpaid for a lengthy amount of time – as a result you run out of money to sustain your business operations, not to mention the risk of having a negative impact on your brand and reputation.
But there are ways to manage or avoid these situations with effective management tools and trying out these 5 helpful tips:
1. Offer incentive programs
If customers are continuously late in paying you on time and why not implement an incentive program. Applying discounts to any account paid early or on time could be of interest and beneficial to your client, therefore improving your cash flow outlook. You will also be able to save on the time and resource costs of constantly having to confirm that payments have been received.
2. Factor your invoices
Factoring your invoices is a funding solution that gives you instant working capital against your outstanding invoices but also grows with your business. With factoring companies such as Populous World, you can sell outstanding invoices that are less than 90 days old and receive a cash advance of up to 95% of the total receivable.
3. Charge a penalty fee
Customers may be motivated to pay faster if their invoice has penalty fees. This strategy will also help you cover the cost of any personal payment issues you may have such as late payment charges on bills that you couldn’t pay whilst waiting for your customers to pay you.
4. Streamline your process and follow up
Organisation is key and having a swift and nimble payment process in place is where to start. Set up recurring invoices with your established customers, protect your business by drawing up a contract and ask for payment upfront. Check that the details of the invoice are correct (amount, date of issue) before you chase the customer. Send a polite ‘follow-up’ email to remind them that the invoice is due, you could also do this 7 days prior to when payment is due as a ‘friendly reminder’.
5. Customer due diligence
Researching and carrying out due diligence on new customers before you take them on as a client could prevent you from any future disruptive cash flow problems. By executing a credit and risk check on customers and checking for prior complaints or charges on new customers could save you from having to chase late payments.
>> Is your business in need of fast, short-term financing? Do you need to access cash faster than your customers pay you?
Populous World is an Invoice Finance provider that unlocks working capital for UK businesses.
Bridging your business’s cash flow gap is something that Populous World excels in delivering, providing you with the funding tools to grow and sustain your business.