Small Business

Working Capital

QuickBooks Payments Research: Surprising Stats that Show Why You Can’t Afford Late Payments

We work with business owners and finance professionals facing cash flow problems every day. Many times it’s because they have to allow invoice payment terms of 30, 60, 90 days or more. However, the problem can also be caused by their customers paying the invoices late. 

 

What happens to small and medium businesses when the money they’re owed becomes past due? That’s exactly what QuickBooks set out to discover in their most recent research report. They surveyed 2,000 mid-sized businesses (defined as having 25 to 200 employees) for insight into the current state of past due invoices and the resulting effects. 

 

The impacts the QuickBooks payments research discovered from late payments are similar to the ones we see business owners face due to long invoice terms. With this new, quantitative information, we can now see the severity of the problem. Below, we’ve broken those impacts down and included relevant stats QuickBooks discovered in their research to show what’s at stake for business owners facing late payments (and the poor cash flow that results). 

1. Slow business growth

Business owners dealing with cash flow issues from long payment terms have expressed in their own words to us how their growth is affected: the lack of cash makes it difficult to impossible for them to pay upfront costs associated with taking on large projects. Some have even had to turn away additional customers because they couldn’t afford to buy materials or hire labor necessary to take on the extra work. Late payments are causing the same problems. How widespread is this issue? Take a look at the research statistics:

 

  • 72 percent of businesses in the survey said that payment processing impacted their ability to grow their business
  • 76 percent said they must address late payments before they could focus on growth
  • 89 percent of surveyed businesses said late customer payments have set back their company’s long-term growth goals

 

The numbers don’t lie: delayed payments are delaying growth for the majority of medium-sized businesses. The next two effects we’ll discuss give insight into why. 

2. Less time for the important things

One reason that late payments delay growth is that they require time-consuming work for business owners and financial professionals. 65 percent of businesses said that they spent 14 hours per week on average completing administrative tasks related to collections. Think about it: that’s almost two entire work days wasted. That time could be spent on serving current customers or growing the business. (If you’re dealing with this, get our email templates for how to ask for payment professionally.)

3. More stress for business owners

The research showed that businesses are owed quite a bit of money in late payments: $304, 066 on average. That fact alone is enough to stress out a business owner who needs that cash to make payroll, buy materials, and pay their own suppliers. It’s been made even worse by the fact that 81 percent of businesses said that their customers had been paying late more often in 2021 than in previous years. That’s on top of other stresses the pandemic has brought on many businesses. To handle this issue, 62 percent asked their customers for installments until the payment was covered. 

 

78 percent of the surveyed businesses said they were more stressed about late customer payments this year compared to previous years. That means business owners have less energy available to focus on the work that matters, further impacting their growth. 



Ways to solve the late payment problem

Any option for eliminating the issues caused by late payments has to get more cash coming into the business, more quickly. The QuickBooks payments research suggests looking for efficiencies in how payments are being handled, citing two statistics. 81 percent of businesses said they didn’t have a fully integrated payment system and 50% said that they either had multiple digital platforms with some automation across these platforms or individual digital processes with no automation within each process

 

However, even with the right technology and processes in place to manage late payments, they can only be minimized – not eliminated. And for many of these same businesses, cash flow issues stemming from long payment terms continue to be a perennial problem. Another solution to consider is speeding up cash flow through alternative finance solutions, specifically through invoice funding. 

 

With invoice funding, an invoice factoring company gives business owners cash for their invoices in days – instead of the months it takes for a customer to pay. The customer then pays the factoring company the invoice total. (See a more detailed invoice funding definition here.) This approach eliminates the slow growth, wasted time, and stress caused by late payments because:

 

  • Business owners get quick access to their own cash for growth
  • Time spent chasing payments is eliminated. The factoring company professionally handles accounts receivable and collections activity on late payments (if necessary and while working closely with the business owner)
  • Having fast, flexible access to the cash businesses have already earned promotes peace of mind

 

No matter what solution you choose to eliminate late payments and the problems they cause, the main point is to take action. That way, you’ll have all the cash you need to grow, focus, and enjoy your business. 




Ready to fund an invoice?

Get started by creating a free FundThrough account, or connecting your QuickBooks, OpenInvoice, or WorkBench account to start funding an invoice.