For businesses that work with customers on account, getting paid on time is essential to maintaining a positive cash flow. But what happens when invoices start to pile up and payments are constantly delayed?
There can be many reasons why customers don’t pay their invoices on time – some may be more easily resolved than others. Here are the top 5 reasons customers don’t pay their invoices on time, and what you can do about it.
1. They didn’t receive the invoice.
This may seem like an obvious one, but it’s surprisingly common. Customers may not have received your invoice because it was sent to the wrong email address or got caught in their spam filter.
To ensure this doesn't become a problem for your business , always double-check that you have the right contact details for your customers before sending out invoices. And if you're using accounting software or small business ERP with electronic invoicing capabilities, make sure you're taking advantage of features like automatic reminders and delivery confirmations.
2. They’re not aware of the payment terms.
Your payment terms should be clear from the outset, but sometimes they can be forgotten or overlooked – especially if your customer is new to working with you.
When this happens, customers may not be aware of when they’re supposed to make a payment, which can lead to invoices being paid late. To avoid this issue, always include your payment terms on invoices and make sure you discuss them with your customer before work begins.
3. They don’t have the funds available.
Sometimes, customers simply don’t have the money available to pay their invoices on time – especially if they’re a small business or startup working with tight cash flow.
If you think this might be the case, try to be understanding and work out a payment plan that suits both parties. You could also offer a discount for early payment, which may incentivize your customer to find the funds to pay their invoice sooner.
4. They’re waiting for approval from their boss or client.
If your customer is working on behalf of someone else, they may need to get approval from their boss or client before they can make a payment. This can often lead to delays, as the approvals process can take time.
To avoid this issue, always make sure you know who your contact is within the company and follow them up for approval if payments are taking longer than expected.
5. They’re not happy with the product or service, but haven't told you.
If your customers aren’t happy with the product or service they received, they may be less inclined to pay their invoice on time – or at all. In these cases, it’s important to try and resolve the issue as quickly as possible with proactive and open communication.
If you can identify and resolve the problem, you may be able to salvage the situation and get paid. But if not, it’s important to cut your losses, plan around it and move on.
There are many reasons why customers might not pay their invoices on time – some more easily resolved than others. By being aware of the most common issues, you can take steps to avoid them and keep your business’s cash flow healthy.
The most important thing to master when it comes to getting paid on time is communication. By staying in close contact with your customers and keeping them updated on your invoices and payment terms, you can help reduce the chances of late payments and keep your business’s cash flow moving.
About CEBA Solutions
CEBA Solutions is a leading provider of NetSuite ERP for Small Businesses, and helps growing companies to improve their business processes with cloud technology. As a NetSuite Solution Provider, CEBA Solutions offers comprehensive services to implement and support your organization’s use of NetSuite.
For more information on how we can help you, please contact us today.