An Invoice is Paid too Late!
Are you constantly faced with payment delays by customers? Especially as a freelancer? Well rest assured, you are not alone in this situation. Nearly 50% of freelancers and independent workers consistently report having problems receiving their payments within the agreed upon time. This issue, which also disproportionately affects SME’s, is becoming the norm and as statistics show, the trend seems to be getting progressively worse over the past few years.
Additionally, no sector seems to be left untouched by delays and non-payments. From construction to marketing, PR and the creative industries, all types of independent professionals and companies are faced with this issue, which in turn represents large losses to the greater economy. A survey conducted in the United States, using data collected from nearly 5,000 freelancers, reports that the average delay on payments against outstanding invoices is 52 Days! Such payment delays have catastrophic consequences for the economy and corporate activity. According to the European Payments Report 2015, 40% of respondents said that the inability of their customers to pay on time seriously hampers their growth and causes serious cash flow problems.
The Consequences for your Business
Little by little, this trend of late payments is killing companies. Below are the three biggest threats to your business if invoices are not settled in time:
- Decreased Productivity: spending time tracking invoices and chasing clients for a timely payment should not be the primary activity for freelancers and small businesses. It takes time, effort and energy….In short it detracts from your primary economic activity and your overall productivity suffers
- Cash Flow Problems: late payments result in real, serious cash flow problems that eventually push freelancers & SME’s into a vicious cycle of debt. How are you supposed to pay your bills and suppliers when your customers are not settling invoices? This has detrimental consequences for the management of any business, specially for independents and SMEs who do not have large cash reserves to fall back on.
- Deteriorating Customer Relationships: following up with clients for outstanding payments can often be a delicate task that requires a lot of tact. Of course this is easier said than done and managing the different pressures of works means that things do not always go as planned. In these cases it is usually your relationship with the client that is the first to suffer…
Therefore, as you can see, the risk of bankruptcy significantly increases as payments are delayed. As Altares confirms in it’s study, a company is six times more likely to fail if payments are delayed past 30 days…