UK small businesses are likely suffering from cash flow problems as they are waiting too long before they chase outstanding invoices, according to the leading accounting system provider in the UK. FreeAgent provide SMEs and freelancers with an award winning online accountancy system, and they believe that many SME owners are giving their customers far too much time to pay their invoices and some are waiting for months before chasing them up.
Research carried out by FreeAgent, in collaboration with YouGov has revealed that only 14%, or one in six, of SME owners have said they chase unpaid invoices within a week of it becoming overdue.
The poll of more than 500 people, who own businesses with five or fewer members of staff, also revealed that 19% of respondents said they would wait 1 to 2 weeks to chase an unpaid invoice, while 23% said they would wait 2 weeks to a month.
18% of small business owners polled said they usually chased unpaid invoices within 1-2 months, 4% said it took them between 2-3 months and 2% said they waited 3 months or longer before requesting payment for an outstanding invoice. A further 4% admitted that they never chased unpaid invoices at all.
Ed Molyneux, CEO and co-founder of FreeAgent 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.”
To use Invoice-o-matic to create and send invoices for free – and set up automated emails reminding you to chase invoices once their payment deadlines have passed – visit http://invoiceomatic.io/. FreeAgent users can also set up automatic invoice e-mails in their FreeAgent account, to send reminders to their clients when their invoices are due.