For businesses large and small, managing overdue invoices is often one of the most difficult tasks. It’s not just about collecting payments; it’s also about keeping customers happy and maintaining a good relationship with them. Especially as a small business, upsetting a regular customer can be detrimental to your success. How do you collect overdue invoices without offending the recipient and losing their business?
Common Mistakes When Chasing Overdue Invoices
Before offering solutions, it’s important to consider the common mistakes small business owners make when collecting overdue invoices. Many times they may use aggressive tactics, such as threats or repeated emails, that can turn off the customer and cause them to take their business elsewhere. It’s also important to remember that most customers are not intentionally avoiding payment. Most likely, they simply forgot to pay or were waiting for a reminder.
With this in mind, the worst thing a business owner can do is send multiple emails within a few days of one another. Spamming people not only causes them to become frustrated and less willing to cooperate, but it can also turn off potential customers when they hear the stories.
Prevention is Better Than the Cure
As a small business, it’s important to take measures to avoid this problem in the first place. Some small business owners prefer to send out a reminder a few weeks in advance to ensure the customer is aware of the deadline. For more regular customers, businesses can set up recurring invoices that are sent out regularly. This helps to reduce the amount of work needed, as well as ensure customers are reminded before any payments become overdue.
What’s more, you should learn about the EFTPOS machine, invoicing software, and other solutions that can help you manage your finances better. Keeping on top of the books is key to ensuring no payments stay outstanding for too long. You can send customised invoices, track invoices, send automated reminders, and more, all from one place.
Of course, if a customer is having trouble paying their invoice on time it may be appropriate to offer a payment plan. Discuss this with them and come to an agreement that works for both parties.
Dealing with Overdue Invoices
To help make sure that you get paid on time, here are some tips for dealing with overdue invoices:
- Contact the customer: It is important to reach out to customers as soon as you have an overdue invoice. This shows that you are serious about getting paid and also allows them to explain why the payment is late. In many cases, it’s simply that the customer forgot and you can resolve the issue quickly.
- Follow up: If you do not receive a response after your initial contact, it is important to follow up with the customer; this could be in the form of a phone call or an additional email. You may even want to consider sending a text message if it is easier for the customer.
- Set payment terms: To avoid late payments in the future, set clear payment terms and communicate them to your customers. This should include what form of payment you accept (e.g., credit card, PayPal, check), when payment is due and the consequences for late payments.
- Consider payment plans: If the customer says that they cannot make a full payment, consider setting up a payment plan. This can be a great way to ensure that the customer pays what they owe promptly, while also maintaining good relations with the customer.
- Hire a collection agency: If all else fails, it may be time to hire a collection agency. This can be an expensive option, but sometimes it is the only way to make sure that you get paid what you’re owed. Of course, this requires a delicate hand and should only be used as a last resort. Normally, invoicing software can eliminate the need for these drastic steps.