Outstanding Invoices: 5 Tips for Getting Paid on Time
Many small businesses rely on invoices being paid on time in order to cover monthly expenses and maintain operations. In an ideal world, customers would always pay their invoices on time. Unfortunately, in many instances this is not the case. If your small business is experiencing a high frequency of outstanding invoices (those that have yet to be paid), or past due invoices (those that have yet to be paid and are past the due date), it’s beyond just frustrating. This could cause gaps in your cash flow and can become detrimental to your company.
In many cases, receiving payment for your outstanding invoices is all about persistence. In this article, we’ll highlight five tips to remain professional yet assertive when it comes to staying on your client’s radar and collecting the money you’re owed.
1. Set your terms of payment
When it comes to billing, transparency is key. Prepare a contract that clearly outlines your terms of service and payment before entering into an agreement with a client. When sending your invoices, include an itemized list of services performed and the payable amount for each. Include the payment due date, and what interest would be incurred if the payment is overdue. Make it as easy for the client as possible by providing them all the information they need to pay you on time.
2. Send them a reminder
Follow up is the name of the game. If an invoice is nearing its due date and you have yet to receive payment, send the client a friendly reminder.
If you sent them their invoice via email, set yourself a reminder to send them a follow up email if you haven’t received payment by a certain date. This could either be on the due date or maybe a couple days before. Sometimes emails can go to spam or get lost in the shuffle of the client’s inbox. Sending a reminder brings it back to the top of their attention after which they hopefully make the payment.
You can ask your client to acknowledge that he or she has received your email with a reply. Some email software systems like Outlook allow you to set up read receipts that notify you when a recipient has opened your email. If you see your client has read the email but you still haven’t received your payment near the payment due date, this is a good indication to follow up.
3. Send a hard copy
Some business owners are old school in their approach and prefer to receive hard copies of invoices and documents of that nature. Ask a client if this is their preferred method beforehand so you know to send their printed invoice via mail once the job is complete. In this case, you can check in via email or phone to ensure that the hard copy was received and see if the client has any questions about it.
4. Pick up the phone
Every client is different. Some prefer to do everything digitally, while others may appreciate a more personable interaction. With these clients, don’t hesitate to pick up the phone and give them a call if you still haven’t received payment. A call not only provides that personal touch, but it allows you to connect with the client in real-time and get an immediate update (versus waiting to receive an email response).
Maybe the client is experiencing difficulties of their own which is effecting their ability to pay you on time. Speaking with them over the phone allows for a more collaborative conversation. You can discuss an amendable solution that allows you to arrive at a payment strategy that suits both parties.
5. Implement a late payment fee
Implementing a late payment fee can incentivize clients to pay on time to avoid the added cost. This may not be necessary for all clients. However, if you have repeat customers that consistently fail to pay you on time, this may be a good way to keep the client but encourage them to meet your payment deadlines. If you are going to implement a late fee, you should be up front about it. Back to tip number one, create a contract prior to the job and include the fee information in the terms of payment.
A late payment fee can either be a fixed price added to the existing overdue balance or an added interest rate. This is how you can list it on an invoice if it’s a fixed price:
Total due on or before March 1: $100
A late payment fee of $50 will be added and must be settled together with the balance within 15 days from the time the payment has become overdue.
Or if it’s an added interest rate:
Total due on or before March 1: $100
Total due after March 1: $110
In the case of late payment, we will add a late fee amounting in 10% of the original payment amount. Overdue payments must be settled within 15 days from its due date.
We understand that outstanding invoices and late payments are extremely frustrating. We hope these five tips will help you to be proactive yet tactful in staying on top of clients to get the payments you’re owed and avoid delays. If after all these efforts, the client still fails to pay you, you may need to take legal action. If you decide to go this route, consult with a lawyer on the matter first.