How Unpaid Invoices Can Hurt Your Company

All businesses will struggle to get clients to pay up at one point or another. Unpaid invoices can be an especially big problem for small companies which might have a tough time paying their staff when their cash flow starts to dry up.

Unpaid invoices are a pretty common issue in Australia. It is estimated that up to 42% of small businesses in Australia struggle with invoices that are constantly being paid late. These invoices are paid late by an average of 6.4 days, according to Inside Small Business This doesn’t seem like a lot of time until you have to start buying supplies that your company desperately needs to function or until you have to look your employees in the eye.

These unpaid invoices can affect a small company in many different ways including the following.

Reduced Cash Flow

Cash flow is king for any company and it is especially important for a small company that might not have much creditworthiness with suppliers. If these invoices stay unpaid for weeks or even months, it can start to have a huge impact on your cash flow and this can cause all sorts of financial issues.

Increased Bad Debt

If the invoices remain unpaid, you might need to write this loss of income off as bad debt. This can reduce your net income and will affect your company’s ability to function or grow. 

Inability to Pay Vendors

Without an income, your small company might find it hard to pay some outstanding invoices of your own. This ripple effect will start affecting other companies you are associated with because you won’t be able to pay your vendors on time and these companies, in return will start to struggle. On top of that, your vendors might be reluctant to do business with you in the future. 

More Debt for Your Company

To keep your company afloat or to keep covering your expenses, you might need to borrow some money. The money you borrow will need to be paid back – with interest. This can eventually mean a much higher operational cost for your company. 

A Decrease in Future Orders

Those who don’t pay their invoices likely won’t buy from you again. This can be a good thing since it can protect you from more unpaid invoices but it also means a smaller client base for your company. To make up for this loss of sales, you will need to spend more money on advertising. 

Increased Stress Levels

Running a small company can be quite stressful and waiting for money from customers can be quite nerve-wracking. The high stress that these situations cause can soon start to affect your health. This, in return, can increase your medical bills since stress can make you more vulnerable to diseases.

Wasted Time

While waiting for customers to pay up, you might postpone some supply orders and this can delay some of your services. You will also waste lots of time reaching out to these debtors as you try to get them to pay up. In the end, the unpaid invoices will affect your company’s ability to grow and growth will occur a lot slower.

If you are struggling to get customers to pay then it is best to give Vic Collect a call. We specialise in debt collection and credit management. With our help, you are much more likely to get reimbursement for your unpaid invoices and you eliminate the chances of tarnishing your company’s image by trying to force debtors to pay outstanding invoices. We can also offer the best advice regarding litigation processes should you want to take legal action against those who owe you money.