3 Tips to Avoid Delinquent Customer Invoices
Have you ever had a client skip out on paying an invoice?
Your business doesn’t just depend on customers. It depends on customers who pay you.
But how do you handle it when a client refuses to pay an invoice when it is due?
An even bigger question is: how much money and time can you afford to spend on collecting your payment?
The good news is that you have several options, ranging from complex and expensive to easy and low cost. Before you do anything, read through these 3 collection strategies. Then, you can decide which is the best fit for your situation:
1. Give them options.
One way to encourage customers to pay their bills on time is to give them options. For example, if the customer cannot pay in full due to financial hardship, you want to outline a realistic payment plan that will enable your customer to pay your invoice.
Before you establish a realistic payment plan, understand that every customer’s situation is different. In working out a payment solution with them, take into consideration the client’s ability to pay, the amount overdue, their payment history, length of time they have been a customer, and specific reason why the account is overdue.
Make sure your customer knows that the payment agreement is a one-time solution to resolve the current problem at hand. To avoid confusion, include a start date and an end date for the payment plan in the agreement.
Taking quick action and offering the delinquent customer a realistic payment solution helps your client see your invoice as a top priority, thereby improving your chances of getting paid.
2. Send reminders
Sending friendly reminders increases your chances of getting paid and maintains goodwill between yourself and the customer. Reminders can take the form of emails, postcards or phone calls to your primary customer contact or their accounting department. Be polite and understanding, yet professional and firm. You don’t want to be seen as too casual or a “pushover” when it comes to customer collections.
3. Factor your invoices
You can always sell any current outstanding invoices to a factoring company. With invoice factoring, you receive a cash advance of a certain percentage of the total receivable. You’ll be responsible for the interest and fees on the advance, while the factoring company takes care of the collection process. With a professional invoice collection service on the task, you don’t have to waste your time sending out friendly reminders or making repeat calls.
Bonus tip: Avoid unpaid invoices in the first place
Unpaid past due payments are a frustrating and expensive business lesson to learn from. The best thing you can do is to make sure that it doesn’t happen again.
If you want to prevent the hassle of unpaid invoices in the first place, research each new client to determine whether they are financially sound and if they have had any prior complaints for non-payment. After that, make sure that you have a signed contract and keep detailed account records.
Taking the time now to set up an accounts receivable model that is a good fit for your business will pay off well, in terms of avoiding time-consuming collection efforts and a costly court battle.