What happens when you send an invoice to a client but they fail to pay? Have you ever been faced with a dreaded unpaid invoice?
An unpaid invoice is a very real problem among small businesses. However, you can take a proactive approach to protecting yourself. Here are some tips for handling one when it arises.
Read on!
1. Establish Clear Payment Terms at the Start
Establishing clear payment terms at the start is an important step in handling an unpaid invoice. To begin, ensure that the payment terms are specified and easily understood in the contract or agreement. This should include the amount to be paid, the due date, and acceptable forms of payment.
Make sure to differentiate between late payments and non-payments when setting the payment terms. Additionally, make sure to include a late payment penalty on your invoice. If possible, offer payment options like online payments for convenience. Lastly, have a written follow-up procedure that helps ensure payment is received on time.
2. Strategize an Effective Payment Reminder and Follow Up
In order to handle an unpaid invoice, it is important to strategize an effective payment reminder and follow-up system. Payment reminders should be sent out immediately after the payment is due and should remain polite and professional.
Depending on the agreement, more frequent payment reminders can be sent out. If payment is not received, a follow-up system should be implemented and should also be polite and professional.
It is also essential to involve the relevant authority if needed. Ultimately, the goal should be to resolve the unpaid invoice and maintain a positive relationship with the client.
3. Avoid Aggressive Tactics When Collecting Debt
When attempting to collect an unpaid invoice, it is important to avoid any aggressive tactics. Reaching out frequently while being polite and professional is the best way to ensure successful debt collection.
Start by sending an initial invoice via email or snail mail, and follow up with a polite phone call or email every two weeks or so. Offer extended payment terms if the customer is having trouble paying. If all else fails, consider offering the customer discounts in exchange for prompt payments.
If the customer does not respond to any of your attempts, consider sending a polite reminder email or letter informing them that legal action may be taken if the debt isn’t paid.
4. Reach Out to Gain Insight Into Payment Delay
It is important to reach out to gain insight into payment delays. This should usually be done after a couple of weeks have passed since the invoice was submitted. Before reaching out, it is important to check that the invoice covers all expected items and that it was sent to the correct email address.
When reaching out, be polite and do not presume the customer is attempting to avoid payment. Ask if there are any questions or specific reasons causing a delay in payment. Collaborate to determine a timeline for repayment and follow up to ensure that the set timeline is met.
5. Ensure the Invoice Is Received & Understood
There are several steps you can take to ensure the invoice is properly received and understood. Firstly, confirm the invoice has been sent and received by the customer. Make sure to provide the customer with clear and detailed contact information such as email address or phone number.
Secondly, keep the invoice format clear and simple, including the due date, invoice number, as well a detailed description of goods or services. Thirdly, provide clear payment details, including how and when payment must be made.
6. Understand Your Legal Rights & Options for Unpaid Invoices
Understand your legal rights and options. First, know that time may be on your side. Statutes of limitations may vary from state to state, but in general, you have three years to bring legal action to collect the owed debt. Second, research the debtor thoroughly before attempting legal action.
You need to determine if the company or individual is credit-worthy and able to cover the owed debts without assistance. Third, stay organized keep the invoice and all payment correspondence in writing and in one place. This is a great way to ensure the debt is paid promptly and may also include payment negotiation.
7. Utilize Third-Party Collection Agencies
When it comes to resolving an unpaid invoice, utilizing third-party collection agencies can make all the difference. It is important to document all communications with the debtor before reaching out to a collection agency. Before selecting an agency, it is essential to thoroughly research which agencies specialize in the type of debt.
Inquire about fees and services offered, analyze their communication methods, and assess their effectiveness. Establishing a clear timeline with all parties involved, staying organized with all the documents related to the debt, and forming a payment plan between the debtor and collection agency should all be things taken into consideration.
8. Set Up Payment Plans With Clients
When dealing with unpaid invoices, it is important to have a plan for getting them paid. Setting up payment plans with clients can be a helpful way to ensure that your unpaid invoices are eventually paid. First, it is important to have a term that is laid out in the invoice that outlines when the payment will be due.
Make sure the payment plan terms are reasonable and acceptable to both parties. It is also helpful to set up a reminder system so that the client is reminded about the payment on time. You can also learn more on small business loans in case your business is in need of funding due to unpaid invoices.
9. Streamline Invoicing and Payment on Digital Payment Platforms
Exercise patience and involve digital payment platforms to ensure prompt payments. Streamlining invoicing and payment via digital payment platforms will enable you to keep track of payment advancements and various other metrics. You should also produce clear and concise digital records of all communication regarding the invoice.
When an invoice remains unpaid, consider sending emails or letters to follow up and remind the customer of their payment obligations.
Lastly, involve an attorney to take legal action in cases when all other payment methods have failed. By utilizing these tips, handling unpaid invoices will become less stressful and ensure successful payments.
Learn How to Handle Unpaid Invoice Today
Unpaid invoices can be incredibly frustrating, but you’re not alone! Following the tips outlined can help ease the stress and ensure you receive payment.
Don’t forget to track every invoice to have an accurate record, and if necessary, consider hiring an attorney to resolve the issue. Hope these tips help with your invoicing!
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