Why Invoices Take So Long to Clear and Hacks To Get Paid Faster

A man in Soviet Russia, a former country infamous for its entrenched bureaucracy and slow processes, walks into a car showroom. After choosing a car, he makes the payment and asks when the delivery will be made. 

“After ten years,” the cashier replies, nonchalantly. 

“Morning or afternoon?” the customer is quick to ask.

The cashier, flummoxed, says, “Ten years from now, morning or afternoon, what difference will it make?”

“Well, the plumber is expected in the afternoon.”

This joke applies perfectly to invoices that still need to be cleared well after you’ve lost all hope. It’s one that runs through my mind as I navigate the bureaucratic offices of popular luxury brands, publishing companies that otherwise seem to have all the money in the world, and corporate houses whose owners are so rich their next 10 generations don’t need to work a single day. 

Recently, the screenshot of a WhatsApp chat by an actor went viral for his sarcastic take on what it would take to get an invoice cleared. His suggestions ranged from signing the invoice with one’s left hand to using the blood of a freshly slaughtered pig as ink. 

According to Hiral Patel, the finance head at a non-profit based in the Indian city of Hyderabad, delays are usually caused because the approval process for an invoice is often multi-tiered. 

“[There’s] a lot of hierarchy involved when it comes to approving invoices, particularly in big companies,” said Patel. “There is no one-stop solution at a single desk. Approvals are required [on multiple levels] to minimise errors. You have to quite literally run from pillar to post.”

Most companies usually follow process automation, a term for using technology to complete certain processes requiring minimal human intervention. So, a correctly filled invoice below a certain amount, called the “materiality limit,” will typically be cleared without requiring approval on multiple levels, according to Patel. For invoices that cross a certain sum, several approvals are required to avoid oversights or errors that can otherwise result in significant financial losses for the company. 

Patruni Sastry – who prefers to refer to themselves as an anti-drag queen, someone keen on breaking the conventional standards of exaggerated beauty otherwise associated with drag – said that it doesn’t help that there isn’t a standard format for invoices. For gender-fluid people including Sastry, whose identities might not completely match their government-issued identity documents, this further complicates the process. 

“There are corporations who hire us for performances to seem inclusive, but will take forever to process [our remuneration],” they said. “Often, when months have passed and I confront [management] about it, I get vague answers related to taxes and stuff that I don’t understand.”

One of the biggest reasons for the delayed clearance of invoices could also have to do with the credit period cycle. Anil Chaudhary, who has worked as an operations manager for various media and entertainment companies and is now with VICE, explained that having a credit period – the period between taking credit and paying it back – is often the most effective and cheapest way to reduce capital infusion. 

“If I’m a chair manufacturer but I don’t have the money to manufacture it right now, I’ll take the raw materials on credit with the assurance that I’ll pay [my creditor] back once I receive the profits from selling the chair,” he explained. “The entire process might take a month or even 45 days, and hence the delay in the payment of invoices.”

However, Chaudhary clarified that when invoices take an inordinate period of time to be cleared, stretching to six months and even a year sometimes, it can mean that the companies don’t have the required processes in place, and do not consider invoice clearance an integral part of their functioning. 

“These companies are also not able to project their costs and revenues on time, adding to the mess,” he said, referring to companies that have invariable balance sheets, and the ones who run out of budgets, no thanks to unplanned expenditure. 

The way Chaudhary sees it, being a freelancer is inherently risky because one is working with multiple clients. In such a scenario, it’s up to the freelancer to do their due diligence before signing up with a company that might be reputed in the market for its content, but might otherwise be a pain when it comes to paying vendors on time. 

“Check with other freelancers before jumping to work with a seemingly popular client,” Chaudhary cautioned. “[Those] who have been affected will be more than happy to warn you about the possibility of delayed invoices.”

If it’s a management issue, he suggests having open communication with the people commissioning you because they might often be able to put in a word or even indirect pressure on their accounts team to get invoices cleared faster. “Always, always be persistent about follow-ups with the management.” 

The invoices of 34-year-old Paras Mehta, a supplier of air compressors and other pneumatic systems to major corporations, run into six-figure numbers because of how expensive his products are. In his case, he cannot afford to wait months on end to be paid because that would mean risking bankruptcy. 

Mehta’s suggestion is to ensure that the contract is made bulletproof before signing up with a client, and making sure that it protects the interests of the freelancer or vendor. The contract should also clearly state the number of days it will take to clear an invoice – this provides the freelancer or vendor with further ammunition to call the client or company out if there is a delay. 

“In my case, I can’t sell air compressor services and then wait six months to get [paid],” he said. “You need to indirectly tell your clients that word gets around in the market and it won’t help anyone. A few of my colleagues even resort to threatening clients that they will call them out on social media, which works almost every single time.”

He further advised vendors not to delay raising invoices from their end by even a day. Regardless of which field you’re working in, Mehta suggested that invoices be raised within the same month the work is done or the services are delivered, so that accountants don’t get to use the excuse that they planned to clear your invoice in the previous bill cycle when your services were delivered, and are now unable to do so as your invoice wasn’t sent on time. 

However, in cases where you cannot burn your bridges with clients that have their own standing in the industry, Karishma Sakhrani – who works as a consultant in the hospitality and lifestyle industry – said that the first option is always to patiently and politely follow up. 

If things get ugly, know that there’s only so much you can do about it. “With a fashion client, the delivery of services from my end was on time, but they simply refused to pay on time despite multiple follow-ups,” she said. “It was only when I threatened to call them out on social media that they immediately credited the amount to me.”

Sakhrani wishes that there were appropriate forums and platforms where these grievances could be shared in real-time, as opposed to professional networks including LinkedIn and the American website Glassdoor which allows current and former employees to anonymously review companies that offer little when it comes to resolving the issues of an aggrieved vendor. “We have a voice on social media, but it’s just that we’re all so focused on putting positive content out there that we never use it.”

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