Check out these tips for how to deal with outstanding invoices and why it is so fundamental to the success of your business.
“If your money is not in your bank account, you can't spend it on the things that you need,” notes Alexander Laureti, a partner at accounting and business advisory firm LMS Advisory, adding that it’s often not the customers you expect who will be late in paying your invoices.
“Once you've done that work and you've sent [the invoice] out, you've got to set your invoice terms and you've got to enforce them as well, because you only have a certain amount of time in your business to run it, and you can only work with certain people, certain customers.
“For your business to grow you've got to be working for the right people and you've got to have the right customers coming into your business.”
According to Mr Laureti, it comes back to the adage about spending 90 per cent of your time dealing with the 10 per cent of your customers who are the most demanding.
“If you're spending time working on people who, for example, aren't appreciating the service you're providing or are continuously slow paying you, you're devoting your resources to a direction that could be completely wrong for your business as well,” he says.
“You've got to know the people you're dealing with – good and bad – so that you can make the best decisions.”
Mr Laureti has these tips for chasing up invoices to help maintain positive cash flow:
Make it part of your everyday job
“If you're a business owner, debt collection is something that as soon as you have a ledger, that is money owed to you. Make it a part of the role that you do. Doesn't matter how busy you are, it's an important part of your business.”
Schedule it during business hours
“You can't be calling people and chasing them on a weekend when they're not taking calls. You've got to prioritise it.”
Compromise can benefit you both
Consider asking those customers to commit to paying in regular instalments. “You can budget with that as a business owner.”
What goes around, comes around
“When you're dealing with customers who will be telling you, 'Look, I just don't have enough money to pay you right now' or 'I'm in a cash flow crunch myself', you can sympathise, of course. You will one day be in that boat.”
For more insights into chasing outstanding invoices, check out Mr Laureti on the My Business Podcast now!