When a customer doesn’t pay an invoice on time, it’s easy to want to just write it off and move on. After all, what’s done is done, right? Wrong. There are actually quite a few business ramifications to writing off unpaid invoices that you may not have considered.
What are unpaid invoices?
An unpaid invoice is simply a bill that a customer has not yet paid. This can happen for a variety of reasons, such as the customer not having enough money at the time, or they may dispute the charges. Regardless of the reason, when an invoice goes unpaid, it can put a serious strain on your business finances and cash flow.
What are the business ramifications of writing off unpaid invoices?
We can’t begin to count on our hands how often we hear businesses suggest writing off an unpaid invoice. “It’s easier” is the general consensus. And to some, that idea might be true but writing off unpaid invoices can leave its mark.
No matter how often or how little you decide to write off an unpaid invoice, that unpaid debt mounts up. It isn’t a reliable strategy either if you want to continue running your business. In the short term you might not notice the effects, however, in the long run the holes will begin to show. For example, when you send a client an invoice you have cost them not only for the products or services they require. You have set that cost to cover your business expenses, time, whether or not VAT is payable, resources among other things. Those costs have still been paid, just out of your pocket.
Writing off an unpaid invoice doesn’t make your costs zero, it puts YOU in negative figures. As your time, services, suppliers, and resources have still been used, only the client hasn’t paid for it. You have.
As a business owner you need to consider how to grow your business, the variety of ways to do that includes Sales and Marketing activities. These processes need to be funded in order to grow and become successful, which in turn makes your business successful. When you write off invoices due to lack of payment, you are cutting the funds you have in your business that can be put towards those activities.
Unpaid invoices not only equal negative figures for your business, but also an inability to fund growth for your business. Going forwards, if you successfully gain new clients there may be delays before the new work is planned and completed which leaves you vulnerable financially. Even if your new client pays on time, you’ve still gone without for the time between the written off invoice and the new payment.
Many businesses then decide to find ways to ease the strain. The most common is to cut corners, use different suppliers, or various cost cutting options. The issue that faces this semi-solution is that you risk upsetting your clients. When you have an established service, people begin to expect that consistency. Cutting costs will inevitably lead to complaints and those clients withholding their payments. And so the cycle continues.
The main reason why businesses fail is due to a lack of cash-flow. Writing of unpaid invoices is the toe in the water which leads to these failings. Working with a debt recovery agency like us, will help make the process of claiming unpaid invoices easier. And can ultimately prevent your business from falling short on income.
What are your other options for writing off unpaid invoices?
Fortunately, there are a few things you can do before writing off an unpaid invoice. First of all, try reaching out to the customer and see if there’s any way to work out a payment plan. Forging that communication around money will ultimately help build customer relationships. Many business owners bury their heads in the sand when it comes to financial difficulties, and being the one to open up the dialogue and offer a human response and solution will put your company in a good light. If that’s not possible or feasible, you may want to consider using a debt collection agency to help you recoup the money owed. Services from My Debt Recovery work to help you reclaim any owed finances. Using a debt collection agency isn’t a bad option, finding the one who works with you will make the process easier to manage and cope with.
Ultimately, writing off unpaid invoices is not always the best solution for your business. While it may be tempting, there can be a number of negative ramifications. Before writing off an invoice, be sure to weigh all your options and consider what’s best for your business.
Here at My Debt Recover, we help you claim any unpaid invoices, late payments and recover debts. We work with you to find the path of least resistance for all parties and focus on the human side of financial difficulties. Each business’s claim is different, and as such the way a case is handled will be different. We focus on individual cases and work to find the most agreeable solution. Contact our team now for advice based on your circumstances.