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Are you worried about unpaid invoices? Timely payments by customers help to maintain seamless cash flow in the business. No matter whether you are running a startup or have a full-fledged business, seamless cash flow is very important to maintain the optimum operation of the business.
The unpaid invoices not just create inconvenience, but also create a problem in running your business. Moreover, it threatens the very existence of your operation. In simple terms, unpaid invoices have a bad impact on your business. When the number of unpaid increases in number, then it indicates that your business is at high risk.
Here, in this article, we will discuss various tips and tricks to deal with the unpaid invoices & maintain optimum cash flow:
1. Make A Plan
Well, if the numbers of unpaid invoices are growing in number, then you should not immediately jump to the conclusion and start threatening your customers. It is imperative to make a perfect plan and strictly follow it. A good plan is important because it will help in reduce outstanding invoices without losing your customers. You should consider various situations so that you can prepare a perfect plan.
Always keep in mind that losing your temper with your customers can significantly affect your business. Before getting angry with your client, you should send polite reminders to your customers. These reminders should be in the form of SMS, emails, and calls. Usually, reminders through calls are more beneficial. These polite reminders will help you to reduce the number of unpaid invoices and also lead to sustaining a good relationship.
2. Invest In Latest Technology
You should hire staff to manage the accounts receivables. But, when the number of outstanding invoices starts growing in number, then it becomes difficult to manage the growing invoices. Thus, we recommend you invest in the latest technology to manage unpaid invoices. The accounts receivable software will automate the process, reduce the probability of errors, and also reduce the workload on your employees.
The latest technology automated accounts receivable software will automatically collect the information of all customers, generate the invoices, and send it to your clients. This software also reduces the probability of errors and sends the right invoices to the right customers. According to the survey, manual approaches leads to more errors. Thus, you should adopt automatic and precise accounts receivable system.
3. Stop Implementing Strict Business Approach
What if discount and penalties ideas do not work? Well, you should not adopt a strict business approach. Instead of losing your temper and threatening your customers, you should write a humble and carefully use your words. You should clearly express to them how your business is suffering from unpaid invoices.
Writing a carefully worded email can help you to encourage your customers to make payment as soon as possible. Hash approaches mostly lead to end up business with your customers.
4. Offer Discounts & Charge Penalties
There are different ways to encourage your customers to make payments at the right time. You can offer discounts to customers who pay early. It will significantly increase the number of payments ahead of the due date. You can offer a discount of 1 to 2% on their total bill if they make payment within a week. On the other hand, if your customers fail to pay their bills on time, then you can charge a fee for late payment.
Most customers may not be motivated by discounts, but they may be afraid of paying late payment penalties. Thus late payment penalties will not just help you to get payments on time but also help in covering the cost of financial issues create by late payments.
5. Take Help Of Business Reporting Bureau
If your customers are not paying due amount even after sending so many reminders, then you can complain about that customer in the business reporting bureau. This complaint can threaten the reputation of the customer in the market. Also, due to this complaint, the client will not be able to get more credits in the future.
Moreover, you will get your payment immediately. But, this should be your last step after implementing all other humble approaches. This step will lead to destroying your good relation with your clients or customers.
6. Sell Outstanding Invoices
It is possible to sell the outstanding invoices to a factored. These invoices should be less than 90 days old. The important thing to consider is that the customers who owe your business money are not individuals. They are either a big organization or an institution.
After selling these outstanding invoices, you will receive cash in advance. It will be 80% of the total amount to be received. You are the borrower, and you will be responsible for the interest and advance fees.
