There's nothing more frustrating than waiting for money. You've built a budget around it. You've planned purchases or payroll on the expectation of receiving it. You may have even noticed a trend of clients who seem to be nonchalant in getting you paid on time. You're pulling your hair out asking, "Why does this keep happening!?" Keep reading to learn why businesses fail to pay their invoices.
One of the biggest factors determining the success or failure of a business is how well they manage their accounts receivable. Accounts receivable management is defined as the practice of collecting money that is owed after extending credit for a product or service. You may not think of invoicing as extending credit but anytime your business delivers a product or a service and has to wait on payment, you're effectively giving the other business a credit line. That payment should be received in a relatively short amount of time or your cash flow is affected.
When your sales team closes on a new client, they quickly move on to the next prospect. With just a few moments to celebrate, there are still contracts that need signed and a quota to reach. As the client is set up in your invoicing system, you're given accurate information about the new sale including the client contact and accounts payable department. What happens, however, when the client stops paying? Was your sales team duped? Surprisingly, one of the reasons for nonpayment is because your information is outdated.
If you're running a business or simply part of the accounts receivable department, you know that unpaid invoices can be the bane of your existence. You need money to pay bills. You need money to invest in the business. You need those invoices paid so you don't have to make an uncomfortable phone call.
The best way to get your invoices paid on time is to determine what processes or systems work best for you and your clients. These processes will help you to improve cash flow by increasing consistency, timeliness and accuracy.
As winter melts away, many of us feel inspired to refresh our homes and offices. Spring cleaning doesn't have to stop with the garage. Growing businesses also need to take this time to look at business finances.
One of the main reasons for hiring a professional to do your taxes is when you have questions or complex tax situations. For small businesses, freelancers or startup companies, there may not be an accounting department to handle things like invoicing or other accounts receivable tasks. When you're a department of one or someone who's only wearing the accounting hat temporarily, you may have some questions such as...
If you are a freelancer or own a small business, it can be tempting to do everything yourself to save money. Tax time can be especially daunting because of changes in tax laws, deductions, sending out tax forms to contractors and more. There are loads of software programs available and a free IRS website for DIY tax prep as well, which may also prompt you to do it on your own.
When you work or partner with other businesses as your customers, it can be especially frustrating when they don't pay their invoices. B2B sales are much more complicated and require building relationships and trust over time. With this in mind, it may be tempting to take late or non-payment personally. Don't fall for it.
When you're growing a small business, it can be overwhelming to take on tasks that aren't your strengths. After all, you started a business because you were good at something... and likely, that something wasn't invoicing or collecting accounts receivable.
Making sales and making money are obviously necessary to grow your business. Instead of searching all over the internet for advice and sample templates, let us give you a head start.
Click on the links below to download our free resources.
The purpose of your accounts receivable department is to invoice, monitor and collect payments for goods and services sold by your business. Your "accounts receivable" refers to any amounts due from clients or billings from any business transactions. While it seems simple enough, A/R can become quite complex when your clients aren't paying on time, your days sales outstanding (DSO) is too high or your accounts receivable turnover ratio continues to decrease.
