Why Late Payments Affect Field Service Companies
8th October 2021 - Historically, late B2B payments have presented a massive challenge for organisations that rely on manual AR (Accounts Receivable) processes and legacy systems. They’re both antiquated, unnecessarily difficult and take up valuable time, annihilating cash flow.
But businesses can avoid the problem of frequent late payments altogether. In fact, with the right technology, companies can simplify payment processes and add value to their business at the same time.
In this article, we’ll explore how late payments affect your company, how to fix the issue of customers not paying on time and how automating your AR processes can enable your business to thrive.
How Late Payments Affect Your Business
Since the beginning of the pandemic, late payments in the UK have skyrocketed, with an increase in unpaid invoices of 23% impacting businesses nationwide.
We’ve listed the main ways that late payments could be affecting your company below:
- You may be unable to take on new projects
If your customer doesn’t pay on time, cash flow becomes limited and hinders business growth. As a result, you may find that you don’t have the funds to take on new jobs or invest in equipment for other, larger projects.
Chasing payments to improve your cash flow wastes your time and takes your focus away from the most crucial aspects of running a business. In the worst case, constantly hunting down unpaid invoices could cause you to lose your competitive edge.
- You could struggle to meet operational expenses
A limited cash flow does more damage than just limiting future projects.
If you’re dealing with frequent late payments, you may also find that your current operating expenses are getting out of hand. When operational expenses become an issue, it inhibits your ability to run a business effectively and you may even need to take out loans to cover the costs.
- Your credit rating might take a hit
According to research, around 38% of small businesses that have suffered cash flow problems have been left unable to pay debts. If you’ve had to take out a loan or used a credit card to cover running costs and don’t have the funds to pay it back on time, your credit rating will suffer.
Credit bureaus take late payments into account when evaluating your credit score, so your rating will drop if you can’t pay by the deadline. With a lower credit score, it will be trickier and costlier to secure loans in the future.
- Supplier relationships could suffer
Late payments create a chain reaction. If your customer doesn’t pay you on time, you then won’t be able to pay your suppliers on time. Consequently, your supplier relationships may suffer as they then have to spend time chasing your business for payments.
Suppliers are more reluctant to work with companies that take a long time to pay invoices and, if late payments become a regular issue, they may cut ties with you altogether.
How to Fix the Issue of Late Payments
The silver lining is that there are ways to fix the issue of late payments. By making your AR processes quicker and more straightforward, your business will be able to prosper and grow.
Here are some ways you can begin improving the payment process:
- Build Good Relationships with Your Customers
It pays to have a strong relationship with your clients. Take the time to build rapport and a positive customer experience and they’ll be more likely to pay their invoices by the deadline.
Although it can be frustrating to chase overdue invoices, try not to let it sour the relationship. A polite approach will help to keep your customer on-side and will yield better results in the long run.
- Invoice Correctly and Quickly
Be mindful of inefficient payment processes that can slow down approvals and lead to overdue invoices. Organisation and attention to detail are key to ensuring that your customers pay on time.
The sooner you generate your invoice and send it over to the customer, the sooner you’ll receive payment. Companies that wait to send invoices out in batches could be inadvertently stalling the payment process by several weeks.
Human error also plays a significant role in creating long payment cycles. For example, customers may dispute incorrect invoices that don’t match up with quotes or include the wrong purchase order, which then requires additional time to resolve the issue.
- Automate Your AR Processes
You need your customers to pay on time so you can keep your business running, maintain supplier relationships and grow the company. Still, sluggish payments remain a frustrating reality for most organisations. That’s where AR automation comes in.
With an all-in-one platform such as BigChange, you can automatically raise invoices directly in the system. By digitising your important documentation and keeping it on one platform, businesses can remove the risk of human error, reduce the amount of time spent on arduous, manual paperwork, and prevent documents getting forgotten about or lost.
Instead, customers can sign digitally to confirm that the job is complete and instantly make an online payment.
It really is that simple.
Learn How BigChange Enables Customers to Pay On Time
Create financial documents instantly based on pre-saved line items or automatically calculated job costs, which can be sent automatically to customers on job completion. Generate and share invoices, quotes, estimates, purchase orders and credit notes in seconds with BigChange.
Plus, with the BigChange Pay feature, you can now also take instant payments.
Discover how BigChange can make your business grow stronger here and arrange a free demo today.