Unpaid invoice amounts unknown to many businesses
Results of a survey published this week, showing a high percentage of small and medium-sized businesses are unaware of the true extent of money owed to them in unpaid invoices, came as not too much of a surprise to us.
The survey, which illustrated that 41 per cent of SMEs in the West Midlands could not say how much was outstanding in unpaid invoices, also highlighted that two per cent were owed as much as £100,000 – which is quite a staggering figure!
With cash flow being incredibly important to businesses of all sizes, but especially SMEs, it is vital to stay on top of chasing invoices. Setting up good credit control procedures is important; invoicing should be carried out and executed promptly and payment terms clear. It is then important to follow up with the customer to ensure that the invoice has been received and is being processed, and of course follow up again if payment isn’t made within the agreed time period.
Some businesses may be reluctant to do this, perceiving it will have a negative affect on the client relationship. However, many businesses have different procedures and ensuring you are familiar with the processes of each organisation (such as purchase order numbers that must be attributed to invoices) will facilitate smooth payment. Friendly communication and reminders should not be offensive to anyone.
With business owners quite often focused on developing the firm and ensuring smooth operations, keeping on top of invoices can be an extra bind. However, without doing so cash flow can be dramatically affected which can directly affect growth – sometimes even survival.
Sometimes, it is worth considering outsourcing these kinds of functions – whether that be standalone activities that are outsourced or more high-support packages such as our Board Support fixed fee solution – offering a range of services from business health check, budgets and forecasting and preparation of management accounts to strategic business advice and additional financial reporting. These kinds of services can transform a company by ensuring smooth running of financial aspects so that owners can get on with business development.
Whichever route is chosen, the results of this survey show the harsh reality of the situation for some small businesses and the issue needs to tackled. The firm’s future can depend on it!