When you’re starting a business, one of the first things you’ll need to learn how to do is pay invoices. You should never let an invoice go unpaid. Getting money paid out of your clients’ accounts and into yours is essential for keeping you solvent and making your job worthwhile.
Getting people to pay you, though, is challenging. Clients will often receive your invoice and then simply put off payment until the end of the period. Sometimes, they’ll neglect to pay you at all.
Non-payment happens a lot in business and is something that many companies have to face. Usually, clients aren’t trying to steal from you. But they will do whatever they can to string out payment, improving their own cash situation while damaging yours.
However, occasionally, they won’t pay you at all – or they won’t pay you enough. And that’s when the problems can start.
In this post, we take a look at some of the critical reasons why you should never let an invoice go unpaid.
It Encourages Poor Behavior In the Future
Letting a single invoice go unpaid encourages your clients to behave poorly in the future. If they believe that they can get away with treating you badly now, then they will use that as a sign that they can continue to do so going forward. Ultimately, they want your services, without actually having to pay for them. And they will often try to get away without reimbursing you if they can.
What’s more, they could tell other clients that you have a relaxed policy towards invoice payments, encouraging them to stop paying as well. In short, failing to follow up on unpaid invoices weakens the position of your firm tremendously.
Many builders, for instance, don’t get paid for the work that they do on time. Most, therefore, use construction law lawyers to help them fight their cases.
It Wrecks Your Cash Flow When You Let An Invoice Go Unpaid
In business, cash flow is everything. You need money on hand right now if you’re going to make a success of your enterprise.
Cash flow, though, can suffer if you provide services but don’t get any payment in return. Eventually, you find yourself starving for cash. And that can really damage your reputation and ability to continue providing services to other customers.
Remember, it’s not just about how much money you have personally. It’s whether you have the cash to pay for the inputs that your other clients need. If you don’t, then a single non-paying client can reduce the quality of service for everyone else.
Never Let An Invoice Go Unpaid Since It Forces You To Take Out Financing
When invoices don’t come through, a lot of companies take out financing arrangements. The most popular setup is a line of credit, although some businesses go to factoring companies.
These solutions are great in the short-term. But if you have to rely on them long-term, they cut into your margins. Fees and interest payments soon add up – costs that wouldn’t have existed, were you to receive your invoice payments on time, as promised by your clients. Again, it’s another reason why you should never let an invoice go unpaid.
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[avatar user=”mike” size=”thumbnail” align=”” link=”file”]Mike Gaudreau is the owner of The Wealthy Boomers, a site devoted to helping seniors make money online. Mike resides in Montreal Canada.[/avatar]
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