Last editedSep 20223 min read
According to a Sage survey, over 30% of U.S.-based SMBs experience late invoice payments. Not only does this impact cash flow, but it wastes valuable time as businesses spend an average of 15 days per year chasing up on these late payments. What are the causes of these delayed payments? Here’s a closer look at the root causes of late invoice payments, as well as how to stop clients’ late payments.
What is a late purchase invoice?
What do we mean when we talk about late invoices? What is a late purchase invoice in this context? When you write up an invoice, it typically includes a due date for payment as well as the expected payment terms. Some payments are due on receipt of invoice, but most come with 15, 30, or 45 days to give the client time. When the due date comes and goes without payment, this is when we consider the invoice to be late. At this stage, you’ll need to chase up on the invoice with further communication.
Top 5 reasons for late invoice payments
There are many reasons why your business isn’t getting paid on time. Sometimes, the customer simply forgets to submit payment. Here are five additional reasons for late invoice payments:
1. Your invoice contains errors.
This is one of the top reasons for unpaid or overdue invoices. When an accounts payable department receives your invoice and spots discrepancies between the invoice and purchase order, this puts the payment on a delay. The invoice might get tossed to the side and buried in a sea of other paperwork. Make sure that quoted prices match corresponding master data, and be sure to include purchase order numbers for easier retrieval.
2. The payment terms are unclear.
The payment terms and due date must be clearly marked at the top of your invoice, otherwise, how will the client know when to pay you? It’s always a good idea to have an in-person conversation about payment terms when working with a new client, ensuring you’re on the same page. When you work for large corporations, expect longer wait times for payment as standard. If you have late invoicing rules, these should also be clearly marked.
3. The preferred payment method is unavailable.
Some clients prefer to pay with credit card, while others might prefer PayPal. If they don’t see their payment preference listed on the invoice, it will take longer for them to get around to payment. Avoid costly delays by offering a wide selection of payment types to suit your clients.
4. The invoice was sent to the wrong person or department.
One of the worst things that can happen is for your invoice to get passed around from one department to another. It can be days – if not weeks – before it ends up in the correct inbox. Before you submit your invoice for the first time, be sure to find out who pays the bills.
5. You are shy about chasing overdue payments.
The longer you wait to act, the longer it will take to get paid. Send a follow-up message as soon as an invoice becomes overdue if you want to expedite payment. Be polite and professional with your messaging, but don’t be shy to ask for payment as well as late fees on invoices if applicable.
How to stop clients’ late payments
Now that we’ve covered some of the top reasons why your business is getting late invoice payments, how can you put a stop to this? One of the first orders of business should be to automate and streamline the invoicing process. If you’re manually typing up your invoices, this leaves ample room for error. Try using dedicated software to track your invoicing and payment process from a central dashboard. An electronic invoicing system makes the payment process more convenient for your customers as well, enabling instant payments and sending automated payment reminders.
GoCardless can be used to collect both recurring and one-off invoice payments, reducing the chances of late payments. Businesses can collect invoice payments directly from customers’ bank accounts, eliminating any uncertainty for a smoother payments experience. You’ll have advance knowledge of incoming payments, all through a central dashboard. GoCardless also integrates seamlessly with over 300 partners, including major accounting and invoicing software like Xero for a joined-up workflow. This means you can get paid up to twice as fast on your online invoices.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.