Money that goes in and out of a business is referred to as cash flow. That’
s simple, right? Now, how do you improve your cash flow? That’s not so simple! One way your cash flow is being negatively impacted is by late and unpaid customer invoices. Why? It’s like an interest-free loan you’re providing a client who doesn’t pay, and this can damage your cash flow significantly.
You send a client an invoice and consider it taken care of, right? Wrong. The process is not complete until the client has paid you the amount on the invoice. Until then, nothing is considered complete! Many clients pay their invoices on time with no issues. However, it’s normal to run into clients who take their time to pay.
It’s important to have a plan in place for when issues like this arise. What’s your plan now? It can be something simple like following up with the client via a phone call, email, or second invoice X days later, or you could instill a process that involves extra fees or penalties if deadlines are missed. Issuing penalties may be better for clients that you really have trouble with.
Find what works for your company and stick with it. Your cash flow is being hurt every time an invoice is paid late, and it’s better to act on it with a clear system than to let it slide while also letting your cash flow slide!