The Truth about How Frequent Late Payments Affect Businesses

The Truth about How Frequent Late Payments Affect Businesses

It’s quite common for New Zealand businesses to experience delays in invoice payments once in a while. But when these delays become a recurring issue among many of your clients, then you huge problem in our hands. Sure, dealing with overdue invoices can be inconvenient. But frequent late payments have a more insidious effect. They disrupt cash flow, and this gives way to a whole host of problems that can threaten the survival of a company.

The Real Impact of Late Payments

Here are some of the most damaging effects of frequent late payments on a business:

They Steal Your Focus

Chasing after late paying clients and delinquent accounts requires a lot of time, money, and effort. This will not only increase your stress, but also prevent you from focusing on core business activities. Since you are distracted, you might not notice any problems that pop up until it’s too late.

They Put Your Company in Debt

Late payments disrupt the flow of cash into your business. If this continues, you will eventually run out of funds and will no longer be able to pay your own bills. To solve this issue, many business owners decide to take out loans just to inject enough money into the company so they can pay off their suppliers and employees.

This strategy might work at first, but things can quickly take a turn for the worse if your clients still do not pay their invoices. You will end up deeper in debt with very few options for a way out.

They Hamper Future Business Opportunities

Since companies that experience frequent late payments end up becoming late payers themselves, other businesses are sceptical about working with them. Suppliers often won’t hesitate to cut ties with you if you are slow to pay your bills because they fear you might soon be insolvent.

You may also find it hard to close deals and form partnerships with other companies because they will doubt your ability to honour commitments and add value to their organisation.

Don’t Worry, There’s Hope!

Although it might seem like late payments are a necessary evil in business, they don’t have to be. There are several steps you can take to make sure you always get paid on time. We recently wrote an article discussing these steps and how you can apply them to your company. You can check out that post here.

For more tips on how to reduce late payments and improve your debt collection results, give us a call at 0800 445 870.

Share this article
Scroll to Top