Once it’s clear that a debt is going to exceed its credit terms, there are two things you must consider. If the second is the best way to go about recovering that debt, the first is of more immediate concern: your cash flow.
Without that expected revenue coming in, the company may not have sufficient funds to satisfy the money going out of the business to bills or suppliers, making it imperative that you’re aware of what’s going in and out of your company at all times. By updating your cash flow forecast, you will promptly be aware of any impending gaps in the business’s cash flow, thus allowing you to take a number of steps to ensure you don’t become the one being chased for outstanding debts.
The first option would be to negotiate an extension to your credit terms with suppliers. A second would be to request earlier payment from another customer – perhaps at a slightly discounted rate as an incentive – whilst a third would be to approach your bank to request an extension of the business overdraft or for a short-term cash flow loan.
Updating your cash flow forecast as and when an invoice exceeds its terms therefore puts you back on the front foot, ensuring there are no nasty surprises.