Late payments on invoices have sadly become an everyday challenge for many companies. A study by Barclays bank found that 58% of small businesses are currently waiting on money that's tied up in unpaid invoices. Here's what you can do to make sure money comes in.
1. Prompt your customer via a polite email.
You've already sent your customer the invoice, but the money hasn't landed in your account. You've checked the details and you know they're correct. If this is a customer who's consistently late on their payments, this bad habit can get in the way of your business. But, sometimes, people just need a little reminder. A polite follow-up highlighting the invoice number and when it was due and asking when you can expect payment is all you need. Also, attach the original invoice for extra clarity. Banking brand Tide has a host of email templates for the different stages of the collection process.
2. Get on the phone.
If you can call your customer, the likelihood of getting paid increases dramatically. This will feel like a difficult conversation, but it should feel slightly awkward for the customer if they're consistently failing to pay you on time – unless there's an explainable issue on their end. If there's a part of the invoice that the customer is disputing, try organizing payment for the rest of the invoice so you can recuperate some of the amount. Taking notes of this call is also a great idea, so you're clear on exactly what they've committed to.
3. Automate the process.
If you use accounting software, you should be able to get the invoice-chasing process automated for you. This means pre-written emails will go out to your customers reminding them when invoices are due – and will continue at staggered times until invoices are paid.
4. Consider further action.
If none of this works, you're going to have to get serious. There are plenty of more major approaches to collecting outstanding debt. These include stopping supplying the customer, submitting a lawyer's letter or taking out the services of a debt collector. Keep in mind that these services usually charge between 20% and 40% of the invoice amount.