Being a business owner isn’t easy. First you have to bring in customers, then you have to get them to purchase your product or service, and then you need to get them to pay. For some businesses, the final step proves to be extremely difficult, and this can cause major cash flow problems.
A recent article from Colorado Business Magazine highlighted the issue, saying that businesses in the U.S. report that over 42 percent of their total invoice value is not paid by the due date, according to the Atradius Payment Practices Barometer.
The businesses reported waiting an average of 20 days past invoice due dates for a large chunk of money that they are owed. So while these businesses may have been bringing in a decent profit, their cash flow was lacking. And we all know that cash flow is essential when operating a successful business.
Are you a business owner facing a similar situation? The article suggested seven tips to try in order to put an end to payment tie ups, including:
- Making sure that customers are not taking advantage of credit policies by setting clear expectations.
- Sending the bill to the customer as soon as possible after the product or service has been delivered.
- Start getting more aggressive about collecting on past-due invoices, which shows customers that prompt payment is necessary.
- Start accepting other forms of payment that streamline the process such as credit cards or mobile technology that accepts electronic payment on the spot.
- Consider paying vendors using new accounts payable solutions, which allow you to pay vendor invoices immediately with a credit card but the money isn’t taken out of your account for as long as 30 days.
These are all great ideas to try in effort to get your business’ cash flow moving in the new year. As the article concluded, while many business owners don’t want to upset their customers by demanding a timely payment, the alternative could be watching your business crash and burn.