In a devastating article by Forbes, a troubling study has indicated that “large companies are systematically paying their smallest suppliers more slowly than their bigger counterparts. Previse, a fintech business specializing in the payments sector, says that on average, businesses pay their smallest suppliers 30 days later than bigger firms.”
A similar sentiment was echoed by Floatapp.com in their article “Late Payment of Invoices is Crushing Small Businesses.”
From these articles alone we can deduce that small businesses are facing significant issues with late or stalled payments. This has a severe impact the bottom line of any enterprise. A single significant late payment can cause crippling financial issues.
Working capital that goes unrealized for longer periods of time can mean payment obligations go unfulfilled. Worse still is the possibility that the funding of new projects, products, investments, or even research can be halted indefinitely. This can be a death sentence for smaller enterprises, which rely on accounts receivable being honored in a timely manner.
By carefully reviewing and refining your accounts receivable process, you can meticulously mold your own business finances. This means being careful about your selection of customers and business associates. Moreover, you should always keep an emergency fund on hand. In case you must cover any additional expenses on your own, you will at least be well prepared.
Use this careful mindset to your own advantage. It is imperative for any business owner to prepare for all financial eventualities. This will also assist you in creating long-term growth strategies.
- It is vital for any small business to maintain a detailed ledger of accounts owed and received
- Nearly half of small businesses in many countries are facing routine late payments
- Refine your accounts receivable process by careful selection of those you do business with
- Carefully monitor your accounts payable and consider ways of cutting down on debt
- Always keep an emergency fund on hand for unforeseen events that might impact your business