Has your small business got a secure infrastructure in place to deal with invoice collection? According to a new set of figures gathered by Free Agent, many small businesses are simply waiting too long to chase up invoices that customers have neglected to pay. This shows that many small business owners are giving customers a bit too much leeway when it comes to paying, to the detriment of their working capital and cash flow. Invoice factoring can help.
In this new poll of more than 500 small businesses employing 5 or fewer people, 19% of companies said that they would wait between one and two weeks to chase an unpaid invoice. This length of times seems about reasonable – but many businesses would wait even longer. Nearly a quarter (23%) said they would wait between two weeks and a month to chase up a payment, with a further 18% waiting between one and two months. At the extreme end, 4% said they wouldn’t normally chase invoices until 2 to 3 months after they were due, with 2% waiting 3 months or longer. 4% of small businesses even admitted to never chasing invoices.
This shows that for whatever reason, many small businesses are waiting a significant period of time to chase invoices up. If you’re waiting a period of months to collect payment, essentially payment terms are being doubled and it’s very hard to plan for the future when cash flow is so hard to come by. Many businesses may find that invoice collection falls through the cracks when there is no dedicated finance department – this is where factoring can help.
Factoring not only lets your business release the money tied up in unpaid invoices but also includes a full credit collection service. The factoring lender will chase up payment professionally and efficiently on your behalf, taking the strain of invoice collection off your shoulders.