Dealing with Delayed Payments? Here Are 9 Ways to Solve Them!

As a business owner, dealing with payment delays can be a frustrating experience. Payment delays occur when customers fail to pay their bills on time, leaving you struggling to maintain cash flows and keep your business afloat. In this article, we will explore what payment delays are, their impact on businesses, and provide 9 ways to avoid and solve them.

What Is a Payment Delay?

A payment delay is the duration of time between a business or institution receiving a bill and making the payment. The delay may be purposeful, could be due to the business needing to verify bill accuracy or wait for a more opportune time to pay.

However, delayed payments can also lead to late payments, causing issues with the business’s cash flow, particularly in industries where supply chain challenges and rising utility costs reduce profit margins.

Many industries use net 30 invoice terms, giving customers 30 days from invoice receipt to pay.

How Will Delayed Payment Affect Your Business?

According to Xero, roughly 50% of invoices issued by small businesses were paid after the due date, and 8% were paid over a month late.

Irrespective of the cause of payment delays, they can have a severe impact on businesses.

a) Impede Cash Flows

One of the most obvious effects of payment delays is that they impede cash flows. Cash flow is the lifeblood of any business, and when payments are delayed, it can make it challenging to meet day-to-day expenses, such as payroll, rent, and supplies.

b) Halt Business Operations

In some cases, payment delays can be so severe that they halt business operations altogether. For example, if a business is unable to pay its suppliers, it may not be able to receive the goods necessary to keep operations running smoothly.

c) Impair Business Relationships

Another consequence of payment delays is that they can impair business relationships. Late payments can strain relationships with suppliers, customers, and even employees. This can lead to a loss of trust and respect, which can be difficult to repair.

d) Worsen Credit Rating

A poor credit rating can have significant consequences for a business, making it challenging to obtain loans, credit, and insurance in the future.

e) Stunt Business Growth

Finally, payment delays can stunt business growth. When cash flows are disrupted, it can be challenging to invest in new products, services, or equipment. This can limit a business’s ability to grow and expand, potentially resulting in missed opportunities.

9 Ways to Avoid Delayed Payments

Fortunately, there are several ways businesses can avoid and solve payment delays. Here are 9 ways to do so:

1) Analyze Current Cash Flow Performance

To prevent payment delays, it’s crucial to analyze your current cash flow performance regularly. By doing so, you can identify any issues or patterns that may be contributing to payment delays. This can help you take corrective action before the situation becomes more severe.

Peakflo’s real-time, out-of-the-box cash flow analytics is that it can help businesses identify payment delays before they become critical. This can help businesses maintain healthy cash flow levels and meet day-to-day expenses.

2) Set Clear Payment Terms & Conditions

One of the most effective ways to prevent payment delays is to set clear payment terms and conditions. Be specific about when payments are due, how they should be made, and what happens if they are not made on time. This can help avoid confusion and ensure that customers understand their obligations.

3) Reward Early Payers

Another effective strategy is to reward early payers. For example, you could offer a small discount for customers who pay their bills early. This can incentivize customers to pay on time, improving your cash flow and reducing the likelihood of payment delays.

4) Tighten Collections for Late Payers

For customers who consistently pay late, it’s essential to have a tight collection strategy in place. This may include sending reminders, charging late fees, or even taking legal action if necessary. By being proactive, you can reduce the likelihood of late payments and ensure that you get paid on time.

Peakflo’s customer portal offers a customer status tracking report that provides valuable statistics on payment behavior, enabling businesses to create tailored workflows based on an escalation matrix. This targeted approach can help businesses optimize their collections process and improve payment collection rates.

5) Automate Follow-ups

One of the most significant challenges of dealing with payment delays is the time and effort required to follow up with customers. To make this process more efficient, consider automating follow-ups. Use Peakflo to send automated reminders and invoices to customers, which can help reduce the workload on your team and improve the likelihood of on-time payments.

6) Make It Easy for Customers to Pay

Another way to avoid payment delays is to make it easy for customers to pay. Provide multiple payment options, such as online payments or credit cards, to give customers flexibility and convenience. With Peakflo’s customer portal, businesses can provide their customers with a user-friendly platform to make payments using their preferred method. The portal allows customers to view and manage their invoices, set up automatic payments, and receive real-time updates on their payment status.

7) Resolve Disputes Efficiently

Disputes over the quality of goods or services provided can sometimes lead to payment delays. To prevent this, it’s essential to resolve disputes efficiently. This may involve working with customers to find a mutually acceptable solution, or even offering refunds or credits if necessary.Are you tired of managing multiple communication channels for your customers?If so, you might be interested in Peakflo’s customer portal. This centralized tool provides your customers with a single location to keep track of their inquiries, disputes, and file submission. This way, you can resolve disputes quickly and avoid prolonged payment delays to maintain positive relationships with your customers.

8) Improve Customer Communications

Optimizing customer communications can prevent payment delays by setting expectations and maintaining open communication with clients.Personalizing communications and addressing customers by name can build positive relationships and improve payment processes. Early warnings of potential payment delays and disputes can also be identified and resolved efficiently through effective communication.If you’re unsure what tone and voice to use when reaching out to your customers, use our free templates so you can collect payments confidently and faster. 

9) Automate Time-Consuming Processes

Consider automating time-consuming processes to reduce the workload on your team. For example, you can use Peakflo to automate invoicing, payment tracking, and other administrative tasks. This can free up your team to focus on more important tasks, such as improving customer relationships and growing your business.

FAQ

What Causes Delays in Payments?

Late payments are often caused by human error, rather than malice or bad intentions.

Common reasons for delayed payments include:

• Lost or unreceived invoices
• Clients mistakenly thought they have already paid
• Cash flow or financial problems
• Disputes over the quality of goods or services
• Errors within invoice details such as typos

Sidetrade experts estimate that the majority (61%) of late invoice payments are caused by invoice errors.

• Lack of understanding between the supplier and customer

How Many Days of Delayed Payment?

The number of days of delayed payment can vary depending on your payment terms and conditions. Typically, a payment is considered late if it is not made within 30 days of the due date. However, you should specify the payment terms in your contract or invoice to ensure that customers understand their obligations and to avoid confusion.