There is classic children’s story, If You Give a Mouse a Cookie by Laura Numeroff which whimsically discusses the downstream events of giving a cookie to a mouse. The mouse will then need milk to wash the cookie down. When he checks himself in the mirror to make sure he doesn’t have a milk mustache, he notices his hair is too long so gives himself a trim. Then he asks for a broom to sweep up the trimmings and since the mouse has a broom he sweeps the entire house which makes him tired. Before bed, the mouse wants a story and ends up drawing a picture which he hangs on the refrigerator. That reminds him he is thirsty and wants some milk. And nothing goes better with milk than another cookie. And the cycle starts over.
Not so whimsically is what happens when you send an invoice late. It is obviously received late by the customer and misses a prior payment cycle and must wait for the next. It may be perceived as non-urgent as it was not sent on a timely basis. Being late, it can be set aside for further scrutiny which results in more delay.
A late invoice is often a sign of other problems; it is not uncommon that they are also incorrect. When incorrect invoices are received, they are most likely returned with questions. Sometimes they are just ignored until someone calls to inquire! They won’t be paid until they are correctly submitted which results in further delays. I have seen this delay payment for months.
Meanwhile, in the accounting and finance department, they are wondering why payment is past due. They start calling/emailing either the customer or the person responsible for sending the invoice (sometimes both). At some point, the invoice is sufficiently past due that it must be excluded from the company’s borrowing base (a monthly report due to your bank if you have a line of credit). At times, it can be large enough that anything due from that customer must be excluded from the borrowing base. This reduces the company’s credit line which means it has less access to funds.
So rather than using funds that should have been received from the customer, the company ends up borrowing against their line of credit. This results in increased interest costs and lower profits for owners or reinvestment in company capital and personnel.
When funds get extremely tight, companies prioritize which vendors get paid. This results in calls from vendors inquiring about payment. This in turn can cause service interruptions or being put on COD status. In the extreme, it can even cause a company to fail. At a minimum, it means more work for accounting and finance who are managing calls from vendors and doing more detailed cash flow planning.
So, the next time you’re sending an invoice, think about how important it is to go out correctly and on time. Not doing so is at least as dangerous as giving a mouse a cookie.
If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to [email protected]
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your cash is flowing. know where.®
Ken Homza
Copyright @ 2025 Kenneth M. Homza