Late invoice payments can affect more than just when you get paid for a product or service; they can cause additional lost hours due to the time it takes to obtain payment and hurt your business relationships. To help you avoid pitfalls like these, we’re sharing the most pertinent findings of a new study by online invoicing company Skynova.
Skynova recently surveyed hundreds of business owners and freelance professionals about their invoicing habits, practices, and stand-out issues. Their experiences offer valuable lessons for others who rely on invoicing to get paid. Read on to find out how to prevent invoicing-related problems and save your business the time, money, and labor required to resolve them.
The Cost of Late Invoice Payments
Skynova found that over 1 in 5 invoices sent out by business owners are paid after the due date. To make matters worse, most business owners and freelancers alike have waited almost a month before finally getting paid; the average longest wait was 26 days. But late payments are more than just annoying and inconvenient.
Business owners stand to lose hundreds of dollars each time this happens. Of those surveyed, the average amount lost to late invoice payments was more than $400. Freelancers also reported losses of over $300 on average.
A business’s financial health often depends on timely payment from clients and customers. That’s especially true for small businesses and those just getting started. For example, a few hundred dollars might not seem like much more than a drop in the bucket for a big corporation, but for an individual freelancer, it could mean the difference between whether or not they can pay their rent or mortgage on time.
Getting Paid: Strategies for Dealing with Late Payments
So, what should you do if a client is late with their invoice payment? Most professionals simply ask for payment repeatedly; 77% of the study’s respondents shared that their primary method is sending multiple payment requests. But as any business owner knows, this method can be a huge time waster. They have better things to do than hound people for money every day.
That might be why 42% have gone a different route and sought out another person at the company in order to ask them for payment. If your initial point of contact is unresponsive to your requests, this strategy might be a more effective use of your time. If that doesn’t work, it might be time to cancel your contract with that particular client, which 36% of respondents have resorted to if left unpaid for long enough.
Charging Late Fees
Another strategy you can use to encourage timely invoice payment is to start charging late payment fees. But according to this study, just 41% of people use this method. Maybe they prefer to give clients and customers the benefit of the doubt and assume they’ll always pay on time. But, as we’ve seen, that’s often not how invoicing scenarios play out.
No one wants to threaten another individual or business with penalties for any reason, but when it comes to your bottom line, you may want to establish a late payment policy. As long as you’re upfront about it to begin with, they should be reasonable in the event that you need to charge them more. It’s helpful to include payment terms and conditions on each invoice, so clients are well aware of your policies.
The Importance of Getting Paid On Time
Many business owners and freelancers are being paid late for their work. Often, their payments are late by almost an entire month, costing them hundreds of dollars. As a result, many have spent valuable time and labor making additional payment requests or looking for a different point of contact at the other company to ask for payment. Even worse, some have simply canceled their contract with late-paying clients altogether.
Whatever method you use to make sure your invoices get paid on time, every time, it’s important to find one that works. The more unpaid invoices you’re left waiting on, and the longer you have to wait for them to be paid, the further your business can fall behind financially. Keep your finances in the black by making sure that individuals and companies you do business with understand your payment terms, including how they can pay you, how long they have to submit payment, and what will happen if they fail to do so.
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