Late and unpaid payments from customers can seriously harm your business if you don't handle them well. They affect your cash flow, stress your workload, and make it challenging to grow.
Oftentimes, late payments occur due to an outdated or overly complicated invoicing system. If your system is old-fashioned or requires a lot of manual work, it directly affects when your customers pay for your services.
As a business owner, finding different ways to make your life easier is crucial. Having a straightforward and effective invoicing system is a safety net that helps you avoid the struggles linked with late payments and ensures your business stays on a steady financial path.
In this article, we'll explore the impact of late customer payments and discuss ways to prevent and handle late payments when they come up.
How does delayed payment harm your business?
Many medium-sized businesses, with teams ranging from 25 to 200 people, always have a tough time with late payments. This is more than just a problem for their immediate cash flow but also their plans for long-term growth.
When businesses have to keep chasing after overdue payments, it costs them a lot. They end up spending a lot of money and time trying to get paid what they're owed. This creates financial stress that affects their day-to-day operations and slows down their overall progress.
Implications of late and unpaid invoices
We had a conversation with Mr. Hassan, one of our valued corporate partners and an experienced textile trader, to understand the challenges he encountered while managing his invoices manually. Here are the key challenges he pointed out:
Crippling cash flow: Without an efficient invoicing system, delays in receiving client payments disrupted the steady flow of funds into his business. He said, "Handling invoices manually made it difficult to predict and manage my cash flow effectively. It was like a constant tug-of-war with my finances."
Increased stress: He shared stories about how his mental well-being was affected. He mentioned that there's a heightened stress level associated with manual invoicing because he had to do the work himself most of the time due to the small size of his team. He shared, "Late payments and the constant follow-ups added unnecessary stress in my life. I spent more time worrying about cash flow than growing my business."
Time wastage: He also highlighted the significant time investment required for manual invoicing. He shared, "Sending invoices manually was a time-consuming process. It took away valuable hours that could have been better used for strategic business activities. I felt like I was stuck in a loop of administrative tasks."
Best strategies to adopt to avoid late payments from clients
These smart strategies will help you avoid the problem of late client payments.
Switch to digital invoices: Waiting for customers to pay with paper invoices doesn't work out well. Slow mail, long payment processes, and the chance of mistakes in the invoice all lead to late payments. Now, think about a different way – digital invoicing. Your customer gets an email with the invoice, and they just go to a website to pick their payment and pay—no need for printing envelopes or worrying about lost papers.
Send your invoices out quickly: The faster you send invoices to your clients, the better your chance of getting paid on time. This is especially important when money matters are uncertain, and timing is crucial. Plus, sending invoices promptly increases the likelihood of fitting into your client's payment schedule and avoiding delays.
Provide rewards for early payments: Motivate clients to pay on time by offering incentives. Consider giving discounts or special benefits to those who settle their invoices before the due date. Clearly outline these rewards in your invoices, making it evident that there's something to gain by paying early. This speeds up your cash flow and builds a rapport with your clients. Creating a situation where both parties benefit establishes you as a business that values prompt payments while fostering a client-friendly reputation.
Simplify invoicing with Leatherback: Mr. Hassan shared that using Leatherback boosted his business operations by 5%. It's all because sending invoices to his clients became easier, saving him time and energy for other business activities.
Different features on our web app make handling payments a breeze. You can make it simpler for clients to pay on time by giving them various payment options, automating your invoicing, and organising separate accounts for different clients - all of which is possible on the Leatherback web app.
Here’s how to create an invoice using Leatherback.
Simply sign up your business by clicking here. Watch this video for a visual guide to the account creation process as a corporate entity.
Once your profile is fully set up and approved, sign into the web app using your login details.
Toggle to the "Invoice" button.
Input your client's details.
Choose the invoice currency and set the preferred due date.
Input item details; the total price is calculated automatically.
Add a descriptive note to your invoice (optional).
Click on "Preview Invoice."
Once confirmed, click on "Send Invoice."
Voila, you're done!
If you need a visual guide, check here.
For more information about getting started on Leatherback contact us at help@leatherback.co. Follow us on LinkedIn, Instagram, Facebook, and Twitter.
