Collecting business debts must be done tactfully, purposefully, and quickly to help keep your business with a healthy cash flow.
Getting paid late for any business, regardless of size and nature, is a huge pain.
Of course, we understand that sometimes invoices become outstanding or delayed for several reasons, some of these reasons seemingly innocent, others, unfortunately, not so much.
Late payments and unpaid invoice collection have and continue to be harmful practices. In the UK alone, we estimate that 66% of invoices are paid late, on average accumulating to approximately 18 days or more.
Setting time aside from your day-to-day business to chase late-paying clients is frustrating as you know that this time could be better spent and more profitable elsewhere.
That’s why for your identified “won’t pay” customers, you need flexible collection invoice strategies that you can put in place to help collect on those outstanding payments.
Better still you need robust strategies that help you avoid the situation of late payment altogether (of course, we can dream!)
Strategy for collecting overdue invoices
With the right late invoice collection strategies in place, your business can reduce your team’s time and energy on chasing invoice payments. That’s why we encourage all businesses to put their all into credit control.
1. Do your research. Make sure if you’re working with a new customer that you check them out. Look into their website, other businesses they work with, run their credentials, etc. You’re looking not only to see if they are a good company to do business with but that they also have a good credit record.
2. Make your payment terms clear. From the start, make sure to outline your terms clearly, communicating your expectations on completion of the work. The best way to make this crystal clear for both you and your clients is to sign a contract or engagement letter. Within this, you can outline payment terms, payment methods, due dates, etc.
You can also include late payment charge descriptions and terms in your contract, so everyone is aware of the consequences of not paying by agreed due dates.
These details of what to expect from your invoice also help your clients identify real invoices from fraudulent ones. Avoiding fraudulent invoices is a big topic and one we have covered in a recent post online.
3. Always include a payment due date on your invoice – if you don’t tell your clients when you want to be paid by, what is the urgency to pay you?
4. Put in place a system for outstanding invoices. This is where you will set up and send invoices before the payment due date. This allows your client to either schedule the payment for the agreed date, or ideally, it will prompt them to pay early.
5. For larger contracts, consider protecting your investment and relationship by asking for a % deposit upfront. This is not unusual for companies, so it shouldn’t be a problem.
6. As soon as you finish the work, make sure to invoice your client. Don’t wait weeks on end and then suddenly issue an invoice. Not only might the work have been forgotten about, but your client could also be in a completely different financial position.
7. Make sure to follow their payment procedures too. For example, if you should send invoices to a specific person in the organisation rather than the person you are dealing with, please send them to this person with a full reference and order details.
8. Look at the possibility of offering payment incentives. For example, could you offer a discount for early payment, or could you look at financing options?
9. Chase invoice payment – send reminders! A little nudge never hurt anyone, and sometimes you might find you’ve ended up in someone’s junk mail, or maybe the first invoice got “lost in the post.”
You should also set reminders in various forms, i.e., phone calls, letters, emails, etc. Not to harass or hound your client, but to show that you have attempted to communicate with your client by all available channels at appropriate intervals.
Remember to be tactful. In business, maintaining good relationships with your clients is key. Showing respect and fairness when contacting clients regarding late payments is essential.
Trust us, hostility and confrontation will close more doors than they will open.
10. Know when to ask for help! If your client still won’t pay, involving expert and professional debt collectors might be the best way forward.
Sending notification to your client regarding your intention to involve a third party often encourages swift payment. However, if this is not the case, it’s time to hand the outstanding invoices and details to the professionals.
Using a professional debt collection agency like Direct Route means we do all the hard credit control and management work for you. We take care of the invoicing process from start to finish, handling all overdue invoices delicately and professionally to maintain working relationships in the future.
We know that not everyone likes making the dreaded phone call to their client chasing an overdue payment; however, we understand that it is a task that has to be done as businesses don’t work for free!
That’s why with the right strategies in place, the process doesn’t have to be a difficult one. Having a strategic plan of action can provide you with peace of mind that late invoice payments will be reduced and dealt with effectively and efficiently every time they occur.