Have late payments caused you sleepless nights before? You’re not alone.
If you’re a small business operating on high volumes of invoices with multiple customers, you’ve likely experienced the frustration of late payments. You’re sending out your invoices hopeful that the money will come - but you keep on waiting, unsure when cash is actually landing in your account. Meanwhile you’re stressing out about being able to pay your employees, cover supply, freight and fixed costs.
You might be supplying a variety of retailers and managing the production, storage and delivery costs of your product - carefully balancing the often tight windows of cash and stock coming in and out of the business.
It’s common to be paid on the 20th of the month - but it’s not unusual to be kept waiting a little extra. And those extra few days, weeks - or months at worst - can cause massive stress and at worst put you in dreadful financial situations.
Why so many late payments - are customers paying late on purpose?
While it’s tempting to point the finger at your customers - the issue is a little more complex than that.
In some cases, larger companies have been accused of misusing their bargaining power and pushing unfair payment practices. Unfortunately, this happens in some instances. But it's not the only reason. Inefficient processes and misaligned incentives are commonly the main cause for late payments.
Let’s look at a scenario. Does this sound familiar:
You’re sending out your invoices through email to dozens of customers weekly, perhaps daily, ending up having to keep on top of countless transactions scattered across your inbox and various customer portals.
You’re left in the dark whether the invoice payment is about to come through - will it be this week, next week? Just when you thought you’re about to receive the money, you’re getting an email about your invoice missing the correct PO number.
Also, the pricing doesn’t seem right. Didn’t you just let them know that you’ve increased your prices? You’re also being asked to issue a credit note because parts of the shipment were missing.
You do this across your whole customer base, communicating via email, phone and text. Keeping track of all correspondence and predicting accurate cashflow seems near impossible.
On the other side of the invoice, you have your customer's accounts payable team trying to reconcile POs, invoices and receipts - imagine following up missing invoice information across hundreds of suppliers and it’s easy to see how payment timelines can slip.
Also, let’s not forget that finance teams are incentivised to hold on to money for as long as possible. You might be doing the same with your household bills. Money in your pocket is more valuable today than tomorrow because over time you can earn interest on your money. Plus - having money now rather than later reduces the risk of uncertainty, giving you peace of mind because the cash sits securely in YOUR bank account and not someone else's.
To get money in the door faster, streamline your invoice process and offer incentives
So process inefficiencies and misaligned incentives cause late payments - where to from here? In reality, no one is winning in the above scenario because the cash that your customers might be holding onto is sitting in their bank accounts earning low interest. Meanwhile you could be growing your business with exactly that cash. To get the money to securely land in your account, you have to make it as easy as possible to process your invoices and then incentivise customers with early payment discounts.
But hang on - doesn’t that mean you’d have to manage just another variable? Tracking payment discounts across all your customers sounds like another admin headache added to the mix.
The key is to streamline and standardise the end-to-end invoice payment so everything runs smoothly and you don’t end up getting lost in more email threads disputing what’s actually payable.
That’s where end-to-end invoice automation can help - imagine you and your customers are working from the same pricing, order and invoice information at all times. All your communication is in one place and attached to the order in question. While accessing real-time information, you also have the option of offering early payment incentives easily managed with the click of a button. If this sounds like a game-changer, Relay might be of interest to you.
Get your invoices paid before the due date with Relay
Relay is an invoice automation platform that gives you visibility of all your invoices and scheduled payment dates - removing the guesswork and anxiety from getting paid. Your customers work off the same data eliminating those endless email threads. Relay also includes a streamlined system to offer your customers early payment incentives so you can have money in your account as soon as the invoice gets approved. Find out how to get paid today.