Dealing with Late Payers
Late payers can be the bane of any small business which is why it’s so important to stay on top of the accounts.
Running a small business can be difficult at the best of times, but when you start dealing with late payers it can feel almost impossible. That’s why it’s hard to overstate the importance of keeping on top of the accounts.
Late payments cost small and mid-sized businesses an estimated $3 trillion every year with one in ten invoices not being paid on time. That’s an enormous figure and the unpleasant result is that some healthy companies which should be thriving will go to the wall.
Approximately one in five business failures are because their customers have been late in paying. It is becoming so common that some businesses use it routinely.
However, like it not the time delay between doing the work and getting paid will always be a problem for businesses, which is why you need to factor this in when it comes to accounts. Unfortunately, many businesses fail to do this.
Invoice tracking
If business starts picking up and contracts come rolling in, it can be all too tempting to look at them as money in the bank. That’s where disaster lies. It leads to complacency or premature investment in expansion. If you’re not careful you could find yourself running into a temporary cashflow crisis which becomes mission critical for your business.
The answer is to plan, plan and plan a bit more – and this starts with getting a firm grip on the numbers. You need a comprehensive view of how much you are spending, what’s coming in and what you are due to pay.
This can help kickstart the income stream and ensure money is coming into your accounts when you need it.
Financial Forecasting
The next thing to do is to make sure you have a clear view of what the future holds. This means having clear and concise financial forecasts. Make sure you have listed all the bills you will have to pay such as payroll, taxes, rent or utilities. This way you won’t be surprised by a big bill.
Link this to your projected income. If it looks as if there will be trouble, this could give you fair warning, so you can take appropriate measures ahead of time – whether that’s arranging a business loan to bridge the gap, making savings or streamlining your own expenditure.
This can take a lot of work and will involve a certain amount of expertise. Many entrepreneurs and small business owners might feel uncomfortable getting to grips with the finances or feel that the expense involved with hiring new staff or buying new IT systems is difficult to justify.
Financial Reporting
Outsourcing bookkeeping represents an affordable solution. It gives you access to a virtual accounting team ready to plug into your business. Regular financial reporting cuts out the errors and enables more effective forward forecasting.
The result – you’ll have a clearer idea of where your business is, you’ll be able to manage your income more effectively and keep your business safe from all the slings and arrows that late payers can throw at it.
