Steady cash flow is integral to the success of any small business. However, the stability of your finances can become severely disrupted by late-paying clients.
Here are some tips on dealing with unpaid invoices to improve your business financing.
Update Invoicing Terms
If a large percentage of your clients pay their bills late, have a close look at your invoice terms. Consider whether the details of payment are unclear so that customers don’t realize that they are not paying on time. Rewrite the terms, and clearly delineate when payments are due and what penalties accompany late payment.
Approach Your Clients
Although you want to maintain cordial relationships with your clients, you can’t ignore unpaid invoices. After you have double-checked the invoice to verify the original due date, contact your clients, and draw their attention to the oversight. Encourage them to agree on a revised payment date. If this date comes and goes without results, resend a copy of the original invoice, and remind your clients of any pending penalties.
Move to the Collection Stage
Using a third party to assist you with collection may jeopardize your relationship with your client, so only do this as a last resort. However, if necessary, have your attorney or accountant contact your errant client and remind them of the debt. Maintain meticulous records of all communications in case you have to file a lawsuit to recover your payments.
Obtain Small Business Financing
To protect company cash flow from late-paying clients, consider applying for small business financing so you always have sufficient working capital to carry on. This may take the form of term loans, merchant cash advances, or invoice financing. Term loans are specific sums borrowed from traditional lenders that you pay back in set payments over time. You have to have a good business credit score to qualify for this type of loan. Merchant cash advances are more flexible, as you borrow against debit and credit card receipts. With invoice financing, you use your unpaid invoices as collateral for loans.
For more advice on small business financing, contact Norus Capital.