Unfortunately, it is not uncommon for a company that seems to have a lot of business to go out of business unexpectedly. While there are many reasons for this happening, oftentimes, businesses are forced to close their doors because they don’t have the cash to continue to operate. This is often due to outstanding unpaid invoices. Fortunately, there are options for businesses that find themselves in this predicament to explore in order to avoid being cash poor.
Having a contingency fund to handle this inevitability is always a good thing. However, because many businesses operate on very tight margins, this may not be possible. The best method is to work with invoice owners that are slow to pay in effective ways to get them to pay the invoice in a reasonable amount of time.
One of the best ways is to make sure that repaying an invoice is as easy as possible. Allowing the invoice owner to have multiple options for paying can actually help increase the time it takes for the invoice owner to pay the business for outstanding goods or services.
Another option is to look for an invoice management application. Many times, these sorts of applications can be found online. They can help a business keep track of all of their invoices so that no invoice gets overlooked. These applications can also alert the business when an invoice is due and when an invoice owner needs to be contacted for payment.
A business may want to consider factoring as well. This is where a percentage of an outstanding invoice is loaned to the business to allow them the operational cash needed. Once the invoice is paid, the factor will be repaid for the loan and any corresponding fees or interest rates that were charged during the loan process.
Slow to pay customers can be a cumbersome issue for businesses to deal with, but it’s something that happens frequently. By having processes in place to make payment easier and flexible and having alternative forms of acquiring operational cash through factoring can make a huge difference. This means a business will be able to have the operational cash they need and not have to close because of a lack of cash flow.