How Small Business Owners Can Collect on Unpaid Invoices

In a perfect world, small business owners would collect on unpaid invoices the moment they sent them out. But if you’re a small business owner, you know very well that not always that easy.

Of course, there are some steps you can take to set your client up to pay quicker:

• Provide an estimate: Invoices shouldn’t cause sticker shock! Get on the same page as your client before the work is done by providing them with an estimate
• Invoice promptly: Make sure you send invoices promptly once a job is complete
• Enable online payments: Everybody loves convenience. Don’t make your client go through the rigmarole of checks and postage. FreshBooks research shows customers who enable online payments get paid twice as fast
• Automate your follow-up or late payment charges: Nobody likes having that awkward “money conversation”. Automating late payment reminders and even charging late payment fees provide an extra nudge and motivation to pay.

Unfortunately, while these best practices increase your odds of getting paid promptly, they don’t guarantee it. So how do you manage those situations when a client is stubbornly holding back payment?

Indeed, it’s more common than you might think. According to a Fundbox analysis of 20 million invoices, 64% of small businesses are routinely affected by late payments. It’s not only mom-and-pop shops that can’t afford to settle their bills in a timely manner either: Our research revealed large corporations—like McDonalds and Walmart—often take the longest to pay what they owe to small businesses.

It’s great to complete a project or ship an order to a customer and send out an invoice right away. While sending out bills might help pad your accounts receivables, however, it doesn’t exactly help your bank account until the checks come in.

One Option When Unpaid Invoices Pile Up

Late payments are one of the major causes of cash flow problems for small businesses. When cash flow problems materialize, companies struggle to pay their bills, buy new equipment and supplies, make payroll, target new customers, open additional locations, remodel existing ones, and develop new products, among other things.

In order to grow your small business, you need quick, reliable access to cash. If you are facing cash flow challenges while waiting for payments for outstanding invoices to come in, a new wave of FinTech firms may offer just the help you need.

Instead of foregoing a significant chunk of your profits by using invoice factoring services or paying hefty fees for loans that require you to take on debt, you can use an invoice financing service like Fundbox to advance payments on your outstanding bills.

Fundbox and FreshBooks

With the Fundbox integration in FreshBooks, you can you can set up a free account in seconds and connect your accounting software with a click. There’s no personal credit check required to get started, and you’ll get a decision within hours. Once approved, you can start clearing your invoices. The entire process, from sign up to approval to financing an invoice, is totally online. If approved, just select the invoices you want to advance, and money will be deposited in your business bank account in as soon as one business day.

Your accounts receivables are assets, even though you can’t spend them at the store or pay your bills with them. However, you can make them work for you sooner. When you need access to funds quickly to cover your day-to-day expenses and keep growing your business, instead of applying for a conventional loan, consider using your own receivables.

A version of this guest post was originally published on the Fundbox Small Business Blog. It has been updated and edited for Freshbooks.