Small businesses are often paid late or not at all by B2B clients, but it doesn’t have to be this way. Using simple strategies for recovery experts, business owners everywhere can fight back.
A recent Financial IT report shows that 33% of overdue B2B invoices are still unpaid 90 days after their due date, highlighting the financial strain on businesses when payments are delayed. Small- and medium-sized businesses are particularly vulnerable to late payments and risk cash flow issues, especially as fraud and payment non-compliance become growing concerns.
The impact of these facts cannot be overstated; small businesses and startups especially rely on steady cash flow to maintain business accounts, and when that flow is disrupted by a late payment or a client who refuses to pay for services rendered, effects can cascade and cause major issues during tax season and beyond.
Texas-based collections agency Southwest Recovery Services explains the underlying problems that lead to this 33% late payment rate, and why businesses often struggle to collect on these debts.
Their team points to persistent difficulties in the small business community in leveraging repayment through in-house teams. Small teams, they explain, often lack the expertise and resources to put meaningful pressure on unpaid or late-paying clients. Legal assistance is also often required to successfully collect, which smaller teams simply may not be able to afford.
One of the most important factors to keep in mind when seeking collections is the client relationship. In some cases, clients are paying late because of circumstances beyond their control. In these cases, most businesses are open to building a repayment plan that benefits both parties and does not incur legal action.
However, this is not always the case. Clients may be facing bankruptcy or be otherwise insolvent, unable to pay at all for services already rendered. This is murky territory, and in many cases, will result in a total failure to repay. In these instances, local laws and regulations may come into play; researching the relevant statues regarding late payment collections is the most important next step here.
Legal action should be a last resort in any late payment scenario, but it must be considered nonetheless. In cases where diplomacy just isn't doing the trick, small businesses are likely better off partnering with a local collections agency than leaving the work to in-house teams. These agencies may provide legal counsel and, more importantly, act as an intermediary between the businesses in order to maintain professionalism and decorum.
At the end of the day, most business owners are reasonable people who just want to do the right thing. Local agencies can help maintain a collaborative, rather than antagonistic, attitude toward the situation, resulting in better outcomes for all parties.
