What Do Late Payments Really Cost Your Business?
It’s a fact of business that some clients will not pay in a timely manner. Perhaps they’re grappling with an unexpected financial stress; perhaps they’re simply poor at financial planning. Whatever their reason, this is not merely an inconvenience – chasing old payments costs your business in time, money, and lost opportunities.
These expenses are rarely planned into cash flow considerations. Are you missing a discount or an investment opportunity for which you could have used this money? How much does it cost you to keep calling and mailing your overdue clients? New sales are required to offset losses and it costs a lot more to get a new client than it does to keep an old one. So just how much of your time is being wasted? How many overdue accounts become more and more overdue since there isn’t always time to follow through?
There are already many “hidden” costs in business, and these late payments add to the load. If it’s a fact of business that some clients aren’t going to pay and a huge cost to your business if they don’t, then you have to plan for the unplanned. What’s your strategy?
Tips to help you avoid overdue payments
1. Be specific about when you expect payment.
2. Bill immediately.
3. Have a written credit policy and stick to it.
4. Make sure your policy is posted and clearly outlined on your invoices.
5. Collect additional contact information from anyone wanting credit, including an email address and cell phone number.
6. If accounts aren’t paid according to the written policy, get in contact immediately. The sooner you let the client know you’re going to pursue the matter, the more likely they are to make you a priority for their accounts payable.
You may want to secure a collection agency to pursue overdue payments on your behalf. This costs money, too, of course, but you’ll save yourself some big headaches, your recovery numbers are likely to be better, and all that time you spent chasing late payments is now free to pursue your actual business, just like you planned.
For help choosing a collection agency, check out the Consumer Awareness Guide: How to Choose a Collection Company.