If you are a small business owner that uses invoices, it is important to make sure you are getting paid, especially in a timely manner. Having even just one invoice unpaid can affect the cash flow of your business. If this happens, not only are you missing out on the money that is owed to you, but you have to spend time following up with the customer asking about the payment.
There are ways to get your customers to pay unpaid invoices and today we will discuss those tips on how you can collect them.
Have a Clear Contract
One reason why a customer has not yet paid is due to the contract. Perhaps you were not clear on the details of when the payment is due. It is important to double-check the payment terms before you start chasing after the customer about the unpaid invoice.
If you do not have a contract in place, you need to consider making one. A contract is a tangible reminder of the agreement and has all the details needed if you ever need to take someone to court.
Send Invoices As Soon As Possible
If you want to be paid on time, you must keep track of your invoices. As a business owner, you are dealing with many aspects to run a business so having a system in place to keep track of invoices is important.
If you forget to send an invoice and send it later, the customer may leave that invoice unpaid for a while. If this is the case, ask them for a firm payment deadline that will work for them.
Set Up Automated Reminders
Set up automated reminders to your customers a few days before the payment due date so you can increase your chances of being paid on time. There are accounting apps that have the ability to send out reminders for you which can be a huge help as it frees up your time so you can focus on other aspects of your business. This step is simple and can make a big difference in avoiding unpaid invoices.
Accept Different Payment Methods
Perhaps you do not have a variety of payment methods which can make it inconvenient for your customers to pay you. The easier it is for a customer to pay you, the more likely you will be paid in a timely manner.
Everyone has their own preferences on how to get paid so simply asking what is easier for them will work and then you will feel confident that you have made it easy for them.
Charge a Late Fee
Having a late fee in place can push customers to make their payments on time. This should be stated in your contract that there is a fee or a penalty if they make late payments. If a customer pays late and a late fee is charged, it usually will not happen again in the future.
Alternatively, you can give discounts for early payments, so they are encouraged to pay before the due date. Not everyone is motivated by incentives, but they might help.
Set Up Automatic Payments
If you have the same customers that are recurring, you can set up automatic payments which will also help you get those payments on time. An accounting program or software can do this for you, and it will always make sure you are paid on time.
You can also always sell outstanding invoices that are less than 90 days old to a factored. When you factor invoices, you get a cash advance of 80 percent of the total receivable. You are responsible for the interest and fees on the advance. Having unpaid invoices for a long period of time can negatively affect your cash flow.
The Bottom Line
If you implement some of the strategies above, you will help avoid unpaid invoices. It is not worth the time and energy to go after customers who have unpaid invoices, and these tips will help you avoid that.