It’s Important to Stay On Top of Slow Payers – Here’s Why
We are all too familiar with slow payers in our industry. Slow payers are a normal part of invoice factoring. As a small business owner, you have your own experience with slow payers. We would encourage you to stay on top of them. Otherwise, slow payers can become bad payers. Some of them might eventually turn into non-payers.
A high volume of slow payers can cause cashflow problems. While you work through that with your customers, we do have a solution to the cashflow issue: invoice factoring. You sell some of your unpaid invoices to us, turning them into cash before your customers have even paid their bills.
The Slow Paying Customer
Wouldn’t it be nice if all your customers paid their bills on the same day that they received them? Some do. We’re guessing you love those customers dearly. Though you are extending them a certain amount of credit by giving them time to pay, they never take advantage of it. Payment is sent right away.
It’s too bad all your customers aren’t like that. Some of them pay much more slowly. The thing about defining slow paying customers is that each business has its own definition of slow. Take two companies that offer invoice terms of 30 days. To one company, a slow payer would be one the doesn’t remit payment within 15 days. The other company might consider 15 days pretty quick. They do not consider a customer slow paying until day 28 or 29.
For the purposes of this post, late payers are those who do not pay as soon as their invoices are received but do make payment within the designated terms. When payment isn’t made until after the due date, you now have a late payer.
Late, Bad, and Non-Payers
Late payers are any customers who do not remit payment within the designated terms. They are not necessarily problematic, but they can be. The thing to be careful of is allowing late payers to become bad payers.
A bad payer is a customer that continually asks for more time to pay. Bad payers make partial payments, bounce checks, and often make promises they cannot keep. Having one too many bad payers can make your slow payers look like saints. It can also seriously jeopardize cashflow.
The last thing you want is for bad payers to become non-payers. Now you have a situation in which collection becomes a nightmare. You don’t want to give away your products or services for free, but can you afford to put the time and resources into collections?
A Bad Apple In Every Barrel
Unfortunately, there will always be non-paying customers who have no problem taking advantage of your business. It is the old ‘bad apple and every barrel concept. However, you can mitigate your losses by staying on top of slow payers. Reducing the number of slow paying customers that you deal with should reduce the number of late payers and bad payers, too. That can only be good for your business.
In the meantime, invoice factoring can help you manage cash flow while you are working things out with your customers. Invoice factoring is quick, easy, and a form of financing you can utilize only when you need it. You are not locked into any kind of long-term financing agreement.
It would be nice if all your customers paid the bills immediately. We know that this doesn’t happen. Do yourself and your company a favor by staying on top of slow payers. Doing so is key to managing both invoices and cash flow.