How to stay on top of overdue invoices and avoid cashflow issues

Running your own business can be rewarding and bring success and satisfaction. However as many have experienced during the last two years in particular, it can also be risky, demanding, stressful and at times, completely overwhelming.  

The hours are long, there are new pressures to face constantly and mounting bills to pay. Not to mention chasing overdue invoices to receive your hard-earned cash. 

The reality of small business

Bookkeeping and admin are often squeezed in whenever you can, and a lot of time is spent chasing money you're owed. Without positive cash flow, you have trouble paying your bills and debts, wages, taking on new clients, ordering goods and services, undertaking new opportunities and upgrading your equipment. 

What if you had a simple and straightforward method to stay a step ahead of cash flow and financial risks, used payment behaviour to know when bills and invoices were unusually overdue, could collaborate with your bookkeeper and accountant efficiently, and saved time and money? That's where XBert can help.  

XBert uses machine learning to detect anomalies, patterns and errors in your Xero cloud accounting data and alert you in real time to risks.   

For invoices, XBert uses payment behaviour rather than due dates to alert you when late payments are unusual for your client or customer. You are prompted to check if the invoice was actually sent or received, if the customer contact for payment has moved on or if your customer is experiencing financial stress.  

Reasons for overdue invoices

Overdue invoices affect your ability to manage and pay your own suppliers, staff wages, projects etc, so it’s important you’re aware of who is overdue and why.  

There can be many reasons your clients aren’t paying their bill on time: 

1. Different payment terms – Your customer or client payment terms may be longer than yours. When trading with big businesses, they hold power and often dictate when payments occur. 

2. Your customer or client is also awaiting payment – They may not be able to pay you until they get paid. 

3. They're busy too – Perhaps your trading partner just one person trying to make ends meet whose fallen behind with their accounts. 

4. Inadequate process – Maybe they don't have the right tools, proper system, or the people available to manage their accounts. 

5. You may be directing your enquiries to a customer contact and they are going unnoticed, or that contact has left the company. 

6. They're under financial stress – They may be struggling and on the brink of collapse. 

7. Your records are outdated or wrong – Duplicate contact records or records with incorrect information can mean invoices get sent to the wrong person or the wrong address. Duplicate bills raised may mean you may pay twice, and duplicate invoices raised can lead you to spend time chasing money you're not actually owed. 

8. They never received your invoice – Was it sent? Perhaps your contact person is no longer there, or the invoice ended up in their email spam folder. 

All of these are serious issues and left too long without attention, could leave you out of pocket. 

Tips to help manage cash flow gaps, overdue invoices and debtor risk 

There are steps you can take time to help manage invoices, cash flow and risks, and avoid unnecessary debt.  

1. Set aside regular time for admin and bookkeeping, weekly if possible. 

2. Keep your contact records updated. 

3. Send invoices promptly and ensure they're going to the right people.  

4. Have fast and simple payment methods in place for your customers. 

5. Use the right tools that clearly show the up-to-date financial status of your business and cash flow.  

6. Be certain of your trading partners. Ensure they have a valid ABN and their details match the Australian Business Register (ABR) record. A business can cancel their registration at any time, and there are much higher risks when trading with unregistered companies. A quick Internet search and credit checks are other ways to research a company.  

7. Confirm your trading partners' GST registration status using the ABR. If you do pay GST and your supplier is not registered to charge it, you may never get that money back. Businesses can deregister for GST at any time so check statuses regularly. 

8. Use payment behaviour to assess debtor risk, so you don't waste time chasing overdue invoices before your customer or client usually pays them. As an example, for the last six months, your client has paid invoices after 30 days; there's little point chasing them after 14 days. However, if more than 30 days have passed, there is increased debtor risk.  

9. Regularly review your payment terms for notoriously late-payers. You can demand part or full payment upfront, negotiate a payment plan, withhold additional goods and services until paid, charge late fees, or cease trading with them. 

XBert helps you stay on top of overdue invoice issues 

With XBert, you can take steps early to address any impacts on your cash flow. You can correct any errors or duplicate contact records, bills or invoices, know when you should or shouldn't be paying GST, and reduce the risks associated with unregistered or cancelled businesses.  

XBert's automated audit and risk detection don't just save you money, but also effort. You spend less time and resources searching for and fixing errors, performing manual GST, ABN and ABR checks, or chasing invoices before your customer usually pays them. Your books will be more accurate and you'll have a more accurate picture of your business' health. 

Sign up for a free trial, connect your accounting file and you'll be alerted if XBert finds anything!

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