It’s common for businesses to offer attractive repayment options to attract new customers. Options may include making an invoice due in 30 days to 90 days. Whether it’s due to forgetfulness or deliberate stalling tactics, businesses often deal with late invoice payments even when they give the customer a reasonable time to pay. Unpaid invoices can have an enormously negative impact on the cash flow of any business.

Specific Ways Unpaid Invoices Impact Small Businesses

Unpaid invoices don’t just affect the company that has not received money it rightfully deserves. It affects the entire economy of the United States as well. The problem of small business unpaid invoices is so significant that it makes up five percent of GDP, which stands for gross domestic product. GDP refers to the economic output of a country and is an essential factor in determining its overall financial health.

A typical small business in the United States holds more than $80,000 worth of unpaid invoices. Additionally, 80 percent of all invoices owed to small American companies are at least 30 days past due at any given time. That amounts to 825 billion dollars of unpaid small business invoices for the entire country. Unfortunately, these late payments mean that the typical small business has only 27 days of cash reserve before it runs out of money if past due invoices remain unpaid.

How to Resolve the Problem of Unpaid Small Business Invoices

Be sure to keep your interactions as professional as possible when you first realize that an invoice is past due. It’s also a good idea to check everything on your end to ensure that you sent the invoice and that it includes clear payment terms. Another possibility is that the invoice went to the wrong person at a company. Sending a brief email at this point to check in with the client may be enough to spark his or her memory to pay the invoice.

If this approach falls flat, consider changing tactics and approach the client on more of a personal level. Express your disappointment in not getting a response to the previous email and the late status of your payment. The benefit of using this strategy is that you can connect with the client as one human being to another. This tends to bring greater results than threats of sending the account to a collection agency.

Another approach to improve timely invoice payment is to give discounts for on-time payments and add penalties for late payments. Cash-conscious customers may surprise you by paying their invoices ahead of schedule to qualify for the discount. When adding a penalty fee, be sure to include language on the invoice of when your company will assess it and how much the client can expect to pay.

Maintain Efficient Control of Your Business Finances by Working with Chicagoland CPAs

Maybe your company invoices are so out of control that you don’t know where to begin or you need to develop a better tax strategy. This is just one of the services we can assist you with at Chicagoland CPAs. Please contact us today.