If you had 15 days out of the year to spend the way you like on your business, it probably won’t be to track down late payments. But according to the Sage survey report titled, “The Domino Effect: The Impact of Late Payments” that is exactly the amount of time US small businesses spend every year.
Cash flow is the lifeblood of businesses, and any restriction to this flow results in limiting how the company operates. As the title of the report points out, a domino effect takes place which weakens the entire organization in one way or another.
The study was carried out in 11 countries, including the US, UK, France, Germany, Australia, Canada, and others. More than 3,000 companies took part in the study to understand the problem of late payments and how it affected their organizations.
The Impact of Tracking Down Late Payments
In the US, 25, 23, and 21 percent of companies respectively stated tracking down late payments impacted their investment, staff pay, and staff commission. As to the reason why the payments were late, 34 percent gave no reason, 30 percent said it was pending, and another 20 percent said they paid at periods.
So what are the barriers when it comes to chasing late payments? The reasons given by US companies include protecting client relationships (32 percent), lacking dedicated resource (13 percent), and lacking time (10 percent).
You can download the full report from the Sage blog.
Impact of Late Payments on Small Businesses
As it applies to small businesses, the impact is even greater. Nancy Harris, Executive Vice President at Sage North America, wrote on the company blog late payments create unnecessary financial stress. She goes on to say this is especially the case for small businesses, because they rely on these funds to run the day-to-day operations of their company like ordering supplies, paying employees and investing in growth. She adds, “If you’re not receiving payments on time, the manpower used in chasing late payments becomes a big issue.”
One way you can keep track of your accounts receivable is by automating your accounts.
Whether you use Sage, or another solution to automate your accounts, it is extremely important for small businesses to start using these technologies. With the right solution, you can establish automatic digital payments, invoicing, notices and more for better visibility of your cash flow.
As small business owners keep adding more tasks to their already full plate, using automation can alleviate the workload. This will give you more time to spend on growing your business and addressing other issues.