Many small business owners could be giving their customers too much leeway when it comes to paying invoices, with some even waiting months until they chase up an outstanding payment.
Research, carried out by YouGov, revealed that just one in six of small business owners said they would chase an unpaid invoice within the first week after it was due.
The poll of businesses with five or fewer members of staff, also revealed that 19 per cent of respondents said they would wait 1 to 2 weeks to chase an unpaid invoice, while 23 per cent said they would wait 2 weeks to a month.
18 per cent of small business owners polled said they usually chased unpaid invoices within 1-2 months, 4 per cent said it took them between 2-3 months and 2 per cent said they waited 3 months or longer before requesting payment for an outstanding invoice. A further 4 per cent admitted that they never chased unpaid invoices at all.
Ed Molyneux, CEO and co-founder of FreeAgent, who commissioned the research, said: “When you’re running a small business, it’s important to ensure that you get paid on time – and when invoices are overdue, you should really be chasing your customers up as soon as possible to request payment. However, our research suggests that many small business owners are letting their customers get away with not paying them for weeks, or even months, after their invoices are due.
“That’s not an ideal scenario for any small business owner, because if you’re not getting paid on time you won’t have the money you need to grow your business. Ideally you should be following up as soon as the payment deadline on your invoice has passed, or at the very least chasing it within the first week after it’s due.
“Not everyone enjoys chasing up their invoices, and it can feel awkward to demand payment from your customers – especially if you are friendly with them. But, by setting aside a regular time every week to go through your invoices, check your business finances and review your expenses, you’ll find it easier to identify who needs to pay and chasing your invoices will become an integrated part of your regular business routine.
“In addition, we believe that using an online invoicing tool like Invoice-o-matic – or managing your invoicing within an online accounting system like FreeAgent – are useful ways to stay on top of your business finances. By doing so, you will not only be alerted when invoices are overdue, but you’ll also be reminded to chase late payers – which will help you get paid quicker and avoid any cash flow issues down the line.”