3 Reasons Businesses Struggle to Collect Overdue Invoices
Collecting on overdue invoices is one of the most uncomfortable aspects of running a business. But it has to be done. When customers don’t pay their bills, they are jeopardizing your business as well as their own. Too many unpaid invoices can lead to financial ruin. As a company that specializes in invoice factoring, we have seen this happen one too many times. Invoice factoring is a way to leverage outstanding invoices to raise short-term cash. Although it doesn’t help a company that struggles to collect overdue invoices, it’s still a valuable tool every small business should be ready to utilize when needed. As for those overdue invoices, here are three reasons businesses sometimes struggle to collect them:
1. Fear of Losing the Customer
In a perfect world, every customer would pay its invoices on time. But how often does that happen? Not very often. That leaves companies with no other choice but to contact delinquent customers to request payment. And unfortunately, doing so makes some company owners feel like the heavy.
They may avoid doing so out of fear that they could lose the customer. They may feel that every customer is so critical to the bottom line they cannot afford to lose a single one. Yet a customer that doesn’t pay its bills isn’t helping. In fact, it is dragging the business down.
2. A Lack of Resources
We have worked with numerous clients that have struggled to collect overdue invoices due to a lack of resources. These are usually small companies with a limited number of staff. Maybe it’s a sole proprietor whose only employees are a spouse and child. The three of them have enough on their plates just keeping up with customer demand. They do not have time to chase down unpaid invoices.
This sort of scenario is completely understandable. Still, it’s not healthy for the company’s bottom line. Those unpaid invoices will eventually have to be dealt with one way or another.
3. A Lack of Knowledge
Still another reason some businesses struggle collecting overdue invoices is a lack of knowledge about how to do it effectively. There are ways to collect without being heavy-handed. In fact, the heavy-handed approach should be utilized as a last resort. There are plenty of less aggressive ways to get paid.
The fact is that some business owners look at unpaid invoices and don’t know where to start. They do not know whether to make a phone call, send another bill, visit the customer in-person, or do something else entirely. The number of options becomes overwhelming to the extent that nothing gets done.
They Can’t Be Ignored Forever
Let us wrap up this post with a Capt. Obvious statement: those unpaid invoices cannot be ignored forever. At some point, they either need to be paid or written off as a loss. A company has to eventually move on.
We hope that your company isn’t struggling to collect unpaid invoices. But if that’s the case, a little online research will reveal a number of strategies you and your staff might employ. In the meantime, we will be standing by to assist with short-term financing needs by way of invoice factoring.
Invoice factoring is a strategy through which you sell an unpaid invoice to an invoice factoring company, in this case Thales. You are given a certain portion of the value of the invoice, also known as a factor, up front. You get the rest when the invoice is paid. We charge a fee for the service we provide. Factoring is quick, easy, and a pretty effective way to meet short-term financing needs.