How to Handle Unpaid Invoices Effectively

Collect Your Unpaid Invoices

Collecting overdue invoices is a necessary evil when running a small business. Many companies have been frustrated at how much the task consumes vital resources while taking away time from serving customers or focus on core competencies.

All companies have to collect unpaid invoices, high risk merchant accounts are no different.

Still, a business needs money so survive and thrive so entrepreneurs need to what they can to ensure that can continues to flow in.

Here are tips for staying on top of receivables management to ensure that operations remain seamless.

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Set Clear Terms

See to it that initial contracts clearly state the terms — receipt of invoice, cash on delivery, net 30, net 60 or something else. The terms and the due date should also be printed on every invoice in a way that’s easy to spot.

Note that some large companies only work with vendors under certain payment terms, such as net 60 or net 90, Read vendor contracts carefully so you’re aware of this upfront and don’t waste time chasing money that the client intends to pay later. 

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Add a Late Fee

Having to spend money needlessly could be a great motivator for your clients to pay their dues on or ahead of time. So include a late fee on your initial contracts to encourage clients to remain current in their payments.

Be very clear about how these late fees will accrue. Don’t forget to include information about the late fee on your invoices and in your invoice reminder notices.

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Send a Friendly Reminder

Sending an email reminder as soon as possible to a client who is late in paying their invoice can be really helpful.  It’s possible they could have just forgotten while they were busy dealing with their to-dos.

Remember to keep the tone light and friendly and include payment details. Be prompt with sending these reminders by setting calendar alerts for a client’s due date and when you should send those follow-up emails.

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Follow Up with an Overdue Invoice

Has the client not paid yet after you sent a payment reminder? Resend your invoice marked as “overdue” should be your next step. The words “overdue” or “past due” should be printed in a large brightly colored font. It should always appear on the envelope if the invoice is mailed so your client can’t miss the fact that it’s time to pay this bill.

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Give that Statement of Account

Since the client hasn’t paid within a given month or quarter, he/she could have another bill due or nearly due. Now would be a good time to send a statement of account to clarify what is due when so the client does not become confused or overwhelmed. 

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Allow Partial Payment

So your client has finally responded saying they couldn’t pay the entire amount owed and is asking to do partial payment. Negotiate with him/her on a number on a number.

Set the terms for the partial payments until everything is paid in full. This is a win-win solution because your client will be still be able to meet his/her financial obligations and you receive the money you’re owed.

If none of the approaches above work, you can cut off your services until they do pay. If it has become habitual and serious are involved, you may want to seek legal action to force them to pay up.