Liquidity bottlenecks due to late payment of invoices
Business is good. Customers are lining up. But suddenly the money is missing. A frequent cause is late payment of invoices. How SMEs issue their invoices faster and deal with poor customer payment behavior.
A full nine out of ten bankruptcies are caused by liquidity bottlenecks (according to SECO). Many small and medium-sized enterprises are familiar with the problem: Suddenly there is no money and you run into payment difficulties. Payment claims cannot be settled in time and there is a lack of funds to finance growth.
This even affects SMEs where business is actually going quite well. There is no lack of customers and the order situation is good - and yet liquidity suffers. The cause of liquidity bottlenecks is often late payment of invoices and poor payment behavior on the part of customers. However, liquidity bottlenecks can often be managed by issuing invoices promptly and creating incentives to encourage customers to pay their invoices earlier.
Invoice faster and avoid payment bottlenecks
In theory, it's simple: if you invoice faster, you get paid faster. In practice, however, optimizing the invoicing process is a necessary evil for many SMEs, which they prefer to put on the back burner.
Especially in smaller companies, however, great success can be achieved by means of simple changes. Companies that spend a lot of time creating invoices, for example, benefit from the use of an invoice program - a matter of course for larger companies. But even suitable invoice templates, such as those find online are already a welcome work relief.
Companies should continue to critically question whether processes are efficient: Who is responsible for creating invoices? Do all employees know who to contact? Are payment periods appropriate or perhaps too long? Are invoices issued promptly? And if not, why not?
Ensure better payment morale with the customer
The problem does not always lie with the biller. Often, the customer is also to blame. Invoices are left lying around, forgotten or ignored. Because of this poor payment practice invoices are paid only after the payment deadline or even not at all.
But even then, companies' hands are not tied. Cash discounts, for example, offer an attractive incentive for customers to settle invoices early: If the invoice is paid within a period set by the biller, the customer receives a discount on the invoice amount. If payment is nevertheless not received even after the payment deadline has expired, a friendly payment reminder is likely to get the customer off to a good start. If this is not successful either, the only remaining option is to initiate dunning proceedings and then debt collection.
At the end of the day, every company knows the one customer who is nothing but trouble. That's why if you work mainly with trusted customers and maintain long-term customer relationships, you'll have fewer problems with unpaid invoices.
More information: bexio
