Let us start by offering further clarification on what we mean by outstanding invoices.
Outstanding invoices are those that are indeed unpaid, but they are not yet late. However, to keep your credit control effective, you don’t want outstanding invoices to become unpaid late invoices, so it’s essential to put some mitigating steps in place to avoid this at all costs.
We’re proud to have collected thousands in overdue invoices for our customers over the years, providing clients with the freedom to keep their business operations and cash flow flowing (click here to find out more). Plus, with the FSB (Federation of Small Business) reporting that prompt invoice payment would provide a £2.5 billion boost for the economy, it makes perfect sense to implement robust credit control procedures asap.
Top tips to ensure prompt payment
Make sure to include payment terms on your invoices/statements/quotes, i.e. a realistic payment due date that is suitable to your business’s operations and helps prompt customers about payment. We also find that the shorter the time period you offer, the more chance you have of the invoice being paid, rather than sitting on your client’s desk gathering dust as they think they have months to pay!
Look to ask for a deposit or invoice in advance if the sale is over a certain amount. This is not uncommon for businesses to ask for, and most clients appreciate that a small deposit may be required for the size of the sale. Depending on the nature of your business, setting up rolling payment plans can also be highly effective.
A few days/week before the invoice is due, it is sometimes worthwhile resending the invoice with a friendly reminder. Or you can call your customer to check they have received everything ok.
Make sure to offer a range of payment options. You need to make it as easy and painless as possible for your customer to pay you.
Don’t offer too much credit. Typically, 30 days is more than sufficient; you can always reduce this if you’re working with a new customer until a strong relationship is established.
Set credit terms and stick to them! If you have credit terms in place, don’t start changing them to suit different customer requests; keep it simple by keeping everyone to the agreed terms.
Carry out credit checks. Starting work with a new customer can be great, but you must still carry out all the routine checks before getting into any financial agreements.
Clearly state the consequences of late payments within your terms. This can act as a good reminder and prompt on-time payments if they know there are financial implications for late payment. For example, you are entitled to add interest and compensation to late payments (a professional collection agency will be able to advise you on this).
Send your invoices as soon as possible. The sooner you issue your invoice, the sooner you get paid!
Have a robust credit control system and practices in place, set with sending email reminders, monthly statements, etc.
Offer incentives for early payment. A small percentage discount for early payment or discount off their next order with you could be all it takes to receive a prompt payment.
Build a strong relationship with your customer. The more you can manage your customers’ expectations and the better the relationship, the better chance you have of prompt payment.
Late invoice payment
Carrying out invoice debt collection is not a business activity that everyone likes to do. It can bring with it a lot of stress and headaches, with late payments negatively affecting your cash flow, everyday business operations, and ultimately business survival.
With reports that small businesses chase up to approximately five outstanding invoices at once, wasting approximately an hour and a half every day – can you really afford the time?
Professional debt collection teams like Direct Route can help get your payments and invoices prioritised and at the top of the “suppliers to pay” list much faster, often sending out simple but effective debt collection letters for unpaid invoices.
At Direct Route, we help you with late payment invoices, acting as an extension of your credit control team. Easing the pressure and stress from you and your colleagues and allowing you to get on with the business’s day-to-day running, knowing invoicing and payment is in safe and trusted hands with your local invoice collection agency.
To find out more call us on 0330 229 1991.