6 Proven Strategies for Avoiding Late Payments and Cash Flow Problems​

Impact of Late Payments

Late payments can obstruct the smooth running of a company, and while overdue invoices may only be for a few clients, they can have a significant effect on the service provider. Especially for smaller businesses that have a challenging time cycling their own cash, big organizations that do not pay their dues on time can create a more significant issue.

Do a Thorough Background Research

A thorough background check before offering your services to a business can help you dodge bad deals and react to critical risks to find their solutions. Business Credit Health Check can be crucial to offer credit terms to a company according to its current creditworthiness

Chase Overdue Payments Politely

Many small businesses are afraid to chase their overdue invoices out of being taken as rude or betraying their relationship with bigger firms. However, if you experience late payments from a company that was regularly paying initially, you should not get swayed by the initial habits and stick to the terms and conditions mentioned in the contract.

Manage Your Late Invoices

To get your payments on time, you should further create and send your invoices as soon as the client receives the service or product. Make sure the generated invoice is in the format requested by the customer, complete with all the essential details. Track your invoices as soon as they become overdue and chase them to get your customers to pay.

Create a Separate Vault for Contingencies

Even after building a revenue forecast, unexpected events can occur at any time, and you may need your credit risk management solutions. You should be prepared for such times by finding funding resources within the business, like from retained profits that remain undistributed to the shareholders.

Offer Early Payments Incentives and Late Payment Charges

It is common for businesses to offer incentives like discounts and reimbursements if the client clears their invoice early. Many companies also charge late payment fees from companies, and many laws allow small businesses to incur interest on overdue invoices.

Follow the Payment Behavior of Your Client

Every business, whether small or large and B2C or B2B, can face challenges that can affect how they pay you for your services and products. Monitor your client’s behavior to understand if you can have risks by continuing your business with them.