Strong cash flow is essential for the health and prosperity of small businesses. When clients are slow to pay their bills, your company faces problems with its own expenses. Here are some tips on dealing with unpaid invoices so that your business has the funding to meet its needs and grow.
Clarify Invoice Terms
Sometimes the fault for late-paying customers may be partially yours due to unclear terms. Carefully peruse your contracts to be sure that payment terms are properly delineated. Put vague guidelines into a more specific language.
Communicate With Slow-Paying Customers
First, double-check the issuance and due dates on unpaid invoices, and if there is a clear problem, contact the client. Politely request a status update. If they’re generally trustworthy in paying their bills, accept any reasonable explanation, and agree on a new payment date. If the customer is still remiss after the second due date has passed, resend the invoice and remind them of possible late-payment penalties.
Use Collection as a Last Resort
If you initiate collection procedures on late-paying clients, this may damage your relationship, so use this only as a final resort when all other options have been exhausted. Always keep comprehensive documentation of your interactions with your clients while you are attempting to pursue the debt. This makes it easier to prove that you did what you could before resorting to having an attorney contact your client or filing a lawsuit in court.
If your company has insufficient reserves, your cash flow will be negatively impacted by unpaid invoices. You may need outside financing to restore cash flow strength. Depending on your business type, the amount you require, and your company credit score, you have several options. For a term loan, you need a high credit score, but you can use the funds not only for immediate needs, but also long-term growth requirements such as equipment purchases, site renovations, or expansion. Merchant cash advances are quicker to acquire and use future credit card receipts as collateral. Invoice financing uses unpaid invoices as collateral.
For more advice on handling unpaid invoices, contact Impact Commercial Capital.