Prevent Unpaid Receivables from Spiraling out of Control

Unpaid receivables can be a pain point for businesses. Waiting on payments from clients can place downward pressure on cash flow, and deplete internal capital reserves. To ensure that invoices are paid on time, and to prevent unpaid receivables from getting out of hand, businesses are implementing the following solutions:

All Sales Require Down Payments

While asking clients for a down payment on large orders is not unusual, some businesses make it a policy across the board for all sales. The reasoning behind this strategy is that clients are more likely to pay the balance on receivables on or before the due date on the invoice if they’ve already supplied a percentage of the total. The drawback to down payments is that it goes against the standard practice of issuing invoices with staggered payment schedules. While asking for down payments is one method of preventing unpaid receivables from becoming a problem, this particular solution can also result in decreased sales due to bad optics.

Charging Fees on Late Payments

Once relegated to businesses in the telecommunications sector, such as cable companies and phone service providers, charging late fees on unpaid receivables is becoming more common in other industries. If a client pays an invoice past the scheduled due date, a fee is attached on top of the amount owed. Since no one wants to pay more than they have to for anything, the reasoning goes that more clients will pay on or before the due date on their invoices. Businesses that use this method have to post a notice about late fees in the office, inform the client before a sale is made, and print a similar statement on the invoices issued, to cover their legal bases. Late fees can be considered a harsh penalty, and can reduce customer loyalty.

Factoring Unpaid Receivables

Factoring unpaid receivables is a great way to keep things under control, without placing the onus on your clients. Factoring is discrete, fast, and transparent, and you don’t have to make any demands for down payments or late fees. Factoring doesn’t change anything from the perspective of the client. For your business, factoring reduces the wait on unpaid receivables from 30 days or longer down to 24 hours. Factoring is the solution for managing unpaid receivables with none of the downsides of the other two methods.

Contact Single Point Capital today to learn more about our factoring solutions and how they can benefit your business.