A Burst Pipe and a Bursting Business Lesson: How Late Invoicing Can Drain Your Cash Flow

Can you picture this: You just got back from a lovely holiday, feeling relaxed, only to find a shockingly huge water bill waiting for you. This is what happened to me. Naturally, I assumed it was some mistake with the water meter. I mean, we didn’t have a visible leak anywhere! But when I called the water company to sort it out, they insisted, “Oh no, it’s a burst pipe. The leak is underground where you can’t see it.”

Now, being someone who isn’t too keen on spending more than I need to, I quickly called a reliable plumbing company to come sort it out. The traders showed up, did the work (they were great!), and everything was fixed. But here’s where the story gets interesting… it took them three weeks to send me an invoice! (good for me)

From Burst Pipe to Business Blunder: The Invoice Delay Dilemma

Let’s connect the dots here. My experience mirrors a common issue many small businesses face: late invoicing. The job gets done, the client is happy, but then… crickets on the billing front.

You’ve done the hard work, but you delay invoicing your client. What’s that doing to your cash flow? Well, much like my underground leak, the problem isn’t immediately obvious, but it’s causing some serious financial drippage in the background.

Why Late Invoicing is a Cash Flow Killer

Just like my giant water bill, late invoicing can sneak up on you and wreak havoc on your business finances. You’ve paid for materials, you’ve paid your staff (or yourself), but you’re sitting around waiting for that cash to roll in. And guess what? Your suppliers, landlords, and service providers aren’t going to wait around for you to settle your invoices just because your client hasn’t paid you yet.

You’re essentially floating your client’s costs, which could lead to cash shortages for your own business operations.

Cash Flow Tips: Let’s Avoid the ‘Burst Pipe’ Scenario

So how can businesses avoid falling into the same trap? Here are a few tips and tricks to get that cash flowing smoothly:

• Invoice Promptly
  Don’t wait two weeks (like my plumbers did) to send your invoice. As soon as the job is done, get that invoice out the door. Use tools like Xero to set up automatic invoicing as soon as a project is completed. It’s like turning the water on as soon as the burst pipe is fixed — the quicker, the better.
• Automate Reminders
  Let’s be real, sometimes clients forget. Set up automated reminders to politely nudge them that their payment is due. Most invoicing tools have this feature built in, so you don’t have to chase clients manually. Think of it like the water company reminding me of my bill — except, less shocking and way friendlier.
• Offer Multiple Payment Options
  Make it easy for clients to pay you. The more options you offer — credit card, direct debit, or online transfer — the faster you’ll get paid. It’s like when you offer someone tea or coffee: either option works, as long as they choose something!
• Shorten Payment Terms
  Sure, offering net 30 or net 60 terms might seem generous, but why give your clients an extra month to sit on your money? Consider reducing it to net 15 or even immediate payment. This will nudge them to pay up faster, helping you maintain a healthy cash flow.
• Keep Track of Your Cash Flow
  Make a habit of regular cash flow forecasting. Just like checking for hidden leaks before your water bill skyrockets, it’s crucial to know when money is coming in and when it’s going out. Tools like Float or Fathom integrate with your accounting software to give you a clear picture of your finances at all times.
• Cash Reserves
  Just like setting aside a little emergency fund for unexpected house repairs, your business should have cash reserves. This way, if you hit a dry patch (or a burst pipe), you can keep things running smoothly without panicking.

The Bottom Line (or Pipeline?)

In business, as in life, cash flow is everything. Waiting too long to bill clients is like having a leak underground — you might not see the impact right away, but sooner or later, you’re going to feel it. And trust me, when the bill hits, it hits hard.

So, be proactive, keep that cash flowing, and don’t let your finances spring a leak! By adopting prompt invoicing practices and using smart tools, you’ll keep your business healthy, wealthy, and worry-free.