Are Slow Paying Customers Putting Your Business at Risk?

Slow paying customers have long been a concern in the business world. They are especially problematic for small businesses that may lack the financial resources to get by when receivables aren’t coming in. But with conditions as they now are, it appears as though slow paying customers are putting some small businesses at risk.

The last couple of years have not been kind to small business. First it was the COVID pandemic and the shutdowns that came with it. That was followed by the arduous task of getting people to come back to work. Now, just as businesses are starting to get a foothold again, runaway inflation is a looming threat.

If your company is struggling with slow payers, you do have options. None of them are guaranteed to help your business survive on their own. But if you combine your options into an effective strategy, you should be able to keep things going until conditions improve.

Inflation Exacerbating Slow Payments

The typical small business offers net 30-day payment terms. But according to a 2021 YouGov survey, the majority of B2B companies end up having to wait beyond the 30-day period. Some 25% are having to wait up to 30 days beyond the original due date. That means putting out goods and services for which the company will not get paid for up to two months.

Unfortunately, the lingering effects of COVID and the inflationary conditions we have experienced over the last 15 months are only exacerbating the problem. Inflation is the bigger problem. It has taken a toll on small businesses that normally maintain a tenuous cash flow position.

Invoice Factoring Can Help

Slow payments are likely to continue as long as inflation remains a problem. Fortunately, invoice factoring can help in many situations. If you are not familiar with the service, it is pretty straightforward.

As a factoring company, we buy invoices from our customers. Our customers get paid for those invoices before the invoices are actually paid by debtors. When the invoices are ultimately paid, we recover our investment. The fee we charge for our service goes to cover our costs and make a little extra.

Invoice factoring, also known as debt factoring, is not the only solution to slow paying customers. But it is an option to think about. We offer invoice factoring throughout Utah to small businesses of all kinds. Feel free to reach out if you want to know more. In the meantime, there are other things your company can do.

Other Cash Flow Strategies

As long as slow paying customers continue to pinch your cash flow, you may have to be creative to keep your business running. For starters, companies that do not have written payment policies should change that. Creditors need to know exactly where they stand.

Companies can also implement new collection strategies to encourage customers to pay within the original 30 days allotted. They should be very careful about being too flexible with all but their most trusted business partners.

In terms of saving money, cash flow can usually be improved by eliminating unnecessary expenses. Doing so may mean cutting back on things that employees have gotten used to, but most workers will understand that inflation is putting a damper on everything.

The fact of the matter is that slow paying customers are more problematic during times of economic downturn. As inflation continues to batter small business, more companies are in danger of being permanently shut down due to slow paying customers. Hopefully that’s not the case for your business. If it is, invoice factoring might help keep the lights on.