When it comes to running your business effectively, there are many factors that need to be managed and monitored on a daily basis. Along with managing employee payroll, tracking deliveries, ensuring you have enough inventory and meeting the needs of your customers, it’s critical to make sure that you stay on top of all of your invoices and payments. If you don’t keep track of these issues, you could end up losing money or missing out on key opportunities because you haven’t been paid on time. Here are five ways payment delays can disrupt your business.
#1: The Scramble for Cash
If a payment is late, you may have to scramble to find funds elsewhere in order to avoid defaulting on your own cash flow. Not only can a late payment seriously disrupt your business plans and put you behind schedule, but it can also trigger a chain reaction that leads to more late payments from other clients—leading to an overall shortage of cash flow.
#2: Missing Opportunities
Sometimes, getting paid by a client takes longer than expected. In some cases, cash flow issues will cause you to delay paying subcontractors and vendors on time. This can have a ripple effect throughout your business that lasts for months. By staying on top of when your invoices are due and how long they take to be paid, you’ll avoid these bottlenecks and ensure that everyone receives what they need—when they need it.
#3: Wasted Staff Time
When invoices aren’t paid, cash flow becomes a major issue. Not only will your business miss out on money in its bank account, but it may also lose significant time as staff members spend hours collecting payments or chasing down clients. Wasted hours add up to wasted money—and possibly even missed opportunities elsewhere in your business!
#4: Unhappy Customers
Slow payments can turn your happy customers into unhappy ones. You’ll find that a delayed payment forces you to chase down clients for money—giving them plenty of time to reflect on whether or not they’re still satisfied with your products and services. Once a dispute is filed with PayPal, many companies end up paying claims in order to avoid negative feedback that could affect future sales.
#5: Slow Sales
One of the most obvious problems with a delayed payment is that it can slow your business’s cash flow. Without upfront payment, you may have trouble purchasing needed raw materials or paying for overhead expenses. A late payment can cause disruptions in production and affect customer service if your employees don’t get paid on time as well. Unless you have money saved up to cover expenses during your client’s delay, you could be looking at a big loss in profits while they sort out their internal payments processes.