How To Collect Invoices And Avoid Cash Flow Problems
No matter the type of company you manage, the invoice and collections aspect of your business is crucial to staying afloat in the market. Smaller businesses especially need to be efficient in the collections process because even a few unpaid invoices can leave a dent in their ability to make ends meet.
While the task of the collection may seem daunting, with a process in mind and invoice factoring solutions in their back pocket, a business should never have to worry about overdue accounts and cash flow problems.
Managing Your Accounts Receivable and Successfully Collecting
Before you provide services to your next client, keep these invoice management and collections solutions in mind.
Don’t Be Generous with Net 30 Terms
Net 30-day invoices mean that the client has 30 days to pay in full after your product is purchased. These terms should really be considered short-term, interest-free loans that can be a double-edged sword for a small to medium-sized business.
Most clients will want to pay invoices this way, but you most likely can’t afford to wait 30, 60, or 90 days to get paid in full. We suggest allowing these terms to clients who have an excellent credit history and consistently pay vendors on-time. A simple pull of a credit report will give your business all it needs to know when approached with a net 30 inquiry by a client.
Promptly Send Your Invoices
Don’t sit on your invoices! This is the easiest way to increase the risk of non-payment and future cash flow problems. We suggest sending out your invoices within a week after product delivery. With the delivery fresh in the client’s mind, receiving your invoice in a timely manner will most likely result in prompt payment.
Work with a Solid Contract
Working with a contract is an extra step you should take to ensure you have legal protection to back you up when payment is due. Before any services are rendered, make sure your contract is bullet-proof. An excellent contract makes several items crystal clear for the client. These items include:
- An outline of all deliverables;
- Payment time frames;
- How your business handles invoice disputes.
Try Out Positive Reinforcement
Many businesses rely on getting clients to pay on time through interest on late payment. However, this method can actually result in getting paid slower. We suggest trying an alternative route. Offer incentives for paying during a select time window. The elimination of the threat of further money owed could get your clients in the mindset of paying you within the chosen time frame.
Don’t Be Afraid to Follow-Up with Clients
Finally, make it a habit as a distributor to follow-up with your clients after a set amount of days has passed. Failure to call and ask about the invoice ultimately makes you part of the reason you’re not getting paid.
Regularly follow-up with clients based on a schedule that you apply across the board:
- Follow up the day you send out the invoice;
- Check that the client received the invoice;
- Call or email after “X” days past due to secure a payment date
What If You Can’t Collect On Your Invoices?
Sometimes small businesses end up having to rely on unruly clients that allow invoices to go unpaid for months on end. This can leave a local business’ cash flow crippled and prevents you from being able to comfortably move forward in your evolution as a company.
In these cases, options like accounts receivable financing and invoice factoring solutions may be the safest route towards getting your invoices paid.
Invoice Factoring Solutions Help Businesses Like Yours
Through a Dallas invoice factoring company, you can solve cash flow problems without ever having to file a dispute against your client. This method allows you to sell your accounts receivables to a company like Goodman Capital Finance in return for a substantial portion of the invoice.
Once your client has paid in full, you’ll receive the remaining portion of an invoice minus a small fee to the factoring company. An advance like this allows you to continue to grow and operate your business without the weight of unpaid invoices drowning your cash flow.
Trust Goodman Capital Finance to Help Maintain Your Business’ Cash Flow
If you would like to have positive cash flow while waiting for customer payments, Goodman Capital Finance can help! Protect your business’ cash flow with our funding solutions that prevent you from having to wait 30 or more days to get paid. Contact us today to find out what you can expect from invoice factoring!