Picture this:
You’re feeling a bit peckish, so you venture to your nearest Morrisons for a skim of the salad bar and a packet of jam doughnuts for 99p. Five whole doughnuts for just a quid. Bargain. On your way out, you shout to lovely Sharon on the ciggie desk: “I’ll settle up in 30 days, might be more like 45… depends on my cash flow, y’know?”
Sounds ridiculous, right?
Well, that’s pretty much our reality as a small business.
We deliver a service, and we wait to get paid. It’s fine if you have awesome clients who pay you on time (or even early!), but a lot of the time, we end up waiting weeks or even months to receive payment for something we’ve long since completed.
In my time freelancing, I’ve seen 30, 45 and even 90-day payment terms. This means some suppliers are waiting three months to receive the money for work that’s already signed off.
I’m no historian, but I can only assume this business practice dates back to when paying invoices was a lot more complicated than it is now. An invoice would be posted to the relevant department, signed off by a manager and then passed to an accountant, who would instruct a payment from the company bank account.
This process has since been expedited by the invention of email, online banking and cloud accounting software… so why do so many businesses still maintain such antiquated practices?
Cash flow, schmash flow
You might be shouting at your phone/laptop right now: “Ellen, it’s about CASH FLOW.” Sure, cash flow is paramount to a successful business. Delaying your outgoing payments until you have a healthier bank balance might do you well, but what about your supplier’s cash flow? If your supplier is a small business, then it’s not just about cash flow and liquidity… it’s food on the table.
Further to the cash flow argument, in my experience, I’ve always found that those with less cash in the bank (e.g. other small businesses) are always the quickest to pay, while corporate and public sector bodies are the richest… and keep you waiting for the longest.
In response to the cash flow argument, there’s certainly a voice in my head that says: “if you can’t afford it, don’t buy it.” This, as a small business owner, is definitely a lesson I live by - I wouldn’t dream of appointing a photographer or booking a co-working space if I didn’t have the funds to do so.
So, why do big businesses and public sector bodies still treat small business invoices like a hassle?
Going around in circles
A late invoice is an all too common occurrence in freelancing life. And, for many small businesses, too many late payments can result in irreversible damage. So, when prompt payment is the difference between life and death… why is it still so hard to ask for what is owed?
Chasing invoices can feel really uncomfortable, especially if you’re getting no response via email and you have to pick up the phone. Not everyone can afford a VA or admin assistant, so calling them yourself and asking for the money (you are owed!) can be difficult.
Other (cheaper) options include making an “accounts@” email address and using this to chase so it feels a little less personal. I was going to write, “so it feels a little less desperate”, but why should we feel embarrassed about being desperate? As freelancers, this money is our lifeline.
It’s not easy when you are waiting for that all-important Starling notification to pop-up to say an invoice has been paid, or when you login to your cloud accounting software and are hit with a blur of red and OVERDUE notices.
So, this week’s newsletter is just a message of solidarity - I know what it’s like. I’d love to know about your longest overdue invoice, or how much you are owed in total. Tweet me @ContentByTheSea or reply to this email for a confidential chat.
Currently enjoying….
📚Brown Girls by Daphne Palasi Andreades
A blend of poetry and prose, this short novel tells the story of a group of brown girls living in Queens, NY.
📺Ted Lasso (Apple TV)
It’s back! This show needs no introduction. If you’re not watching then you’re seriously missing out on some heartwarming stuff.
That’s all from me this week, I’ll see you next Friday for more of the same.
Ellen x
If you liked this, you might also like:
10 March: Meet my new best friend
20 January: Not all women
4 January: New year… new me?
16 November: When life gives you poop
9 November: The last pasta sauce
26 October: I’m no mumpreneur
14 September: R-E-S-P-E-C-T: Finding out what it means to me
31st August: Giving up the balancing act
24th August: The longer I wait, the harder it gets
29th June: Coping with all of *this*
22nd June: Did you jump or were you pushed?
As I come to the end of what has been probably my scariest invoicing month in two years (lots of money sitting in my FreeAgent, none in my bank - most it 30 days overdue or more), I feel so much of this. I came very close to packing it all in and getting a 'real' job.
'those with less cash in the bank (e.g. other small businesses) are always the quickest to pay, while corporate and public sector bodies are the richest… and keep you waiting for the longest.' - so incredibly true!