If your business operates on an invoicing system, you’re probably familiar with late payments and even non-payment. Customers don’t pay invoices on time for a number of reasons, ranging from lost bills to unexpected additional expenses that customers know they can’t afford. Many small business owners are intrigued as to how to politely seek overdue payment. An unpaid invoice, regardless of the circumstances, hurts your business. If you want to keep your cash flow stable, you must take action; being transparent with customers and having some backup strategies on hand are essential.
Here are some tips for how to handle late-paying and non-paying customers:
1. HAVE A WRITTEN CREDIT POLICY
Always have a written credit policy and stick to it to manage your risk. Be consistent in extending credit and payment terms. The best way to avoid defaulted payments is to perform due diligence before extending credit.
2. MAINTAIN DETAILED RECORDS
Invoice disputes are often triggered by unclear or incomplete invoices. To reduce errors, use an invoice template that includes all required details. Also, maintain detailed records in case you end up sending it to collections. In addition to that, offer options such as electronic payments and other automated payments to make it easier for customers to pay.
3. CHARGE LATE FEES
No one wants to pay a late charge, but setting one up ahead of time will help customers avoid paying their bills late. Establish a framework that is backed by a regulation or collection of terms & conditions. For example, if you don’t pay within five days, you’ll get a warning; if you don’t pay within ten days, you’ll get a late fee; and if you don’t pay within twenty days, you’ll lose service – according to gGordano
4. SET UP A PAYMENT PLAN
If a customer is experiencing cash flow issues and can’t afford to pay the invoice in full right away, setting up a payment plan can help you get paid. Negotiate a sum that the customer can handle as part of the payment plan, as well as the period of time that payments will be made.
5. SEND POLITE REMINDERS
If a client’s payment is overdue, then you need to send a friendly reminder email as soon as possible. To improve your chances of being paid, you can use a payment reminder email template. Notify the customer that the invoice is past due and have a payment deadline. Remind them of the payment options you accept, as well as any late fees that might be included in your terms of payment. For reference, attach the initial invoice to the email.
6. HIRE A COLLECTION AGENCY
Consider hiring a Debt collection agency to help you escalate the situation and get outside help collecting your money. Collection companies are usually effective in obtaining money from debtors, and are viable choice for recovering some of the funds owed to you. If you are looking to hire a collection agency, make sure it’s a reputable firm and get your invoices paid.
