Why You Have So Many Unpaid Invoices
Strong cash flow is essential for a business no matter what size, as it is the lifeblood of the organisation and determines the companies overall financial performance. If the business’ liquid assets are increasing, there is the opportunity to not only settle debts but being able to reinvest, pay expenses and put money aside for future financial challenges.
Despite the importance of positive cash flow, a lot of companies fail to generate enough cash to stay liquid by having a critical number of unpaid invoices, a financial loss which might threaten to slow the operating business down eventually. While it is easy to blame it on the customer who failed to pay on time, it is often not their fault but the business owners. Even though the financial department has sent out invoices after invoices, called the manager or announced outsourcing the receivables to a debt collection agency, the reason why some businesses are still waiting for their invoice to be paid is probably that they themselves give the customer reason to delay the payment.
A lot of customers prioritise one invoice over another and we have put together helpful tips for your accounts receivable process to pay attention to before the invoice leaves the finance department. If you follow these improvements, this might be the way to get the customer to pay your bill faster and keep your invoices at top of the stack.
1#
Check your invoice format. Maybe your customer has given you a template to use that your finance department forgot and now it is hard for the customer to have your invoice approved on their end, as the wrong formatting cannot be fed into their system. Always make sure your invoice fits the customer’s requirements. By using the right format, the customer is able to approve payment more quickly.
2#
The invoice has left your financial department too late, making it impossible for the customer to pay on time. Do not spend too long to create and deliver an invoice. Instead, hand the bill over quickly in order to leave the customer plenty of time to pay you within terms.
3#
Your competitors offer incentives for early payment and your business doesn’t. Think about a percentage on the next invoice to get paid the full amount and on time. By offering incentives you give the customer a pleasant reason to work with you again.
4#
The information on your invoice is incorrect or incomplete, hence the customers accounting department needs to get in contact with you to finalise the payment. As this extra step might take you down the priority list, make sure you always double check for correct and complete information.
5#
The customer has simply forgotten about your invoice, as you did not follow it up in a timely matter. This is why it is advisable to communicate regularly with the customers. Communication will not only help you to build a better relationship with the customer but improve your own work by learning what needs to be done to improve the way your invoices are handled to get paid on time.
All of the above matters might be reasons why your invoice sinks to the bottom of the stack. By eliminating such obstacles and taking a close look at every step of your current debt collection process you will most likely increase the possibilities to get paid earlier. Another helpful tip is to invest in an accounts receivable management software. This tool not only allows you to save customised templates which will be helpful for future invoices, this way your entire finance team is able to access all important documents easily to communicate effectively with customers regarding an invoice or dispute.
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