10 Step Action Plan For Chasing Late Invoices
You’ve delivered on your work, set your payment terms and sent an invoice to your client. But the payment is overdue, and you haven’t received a response or update.
But no need to panic just yet! There are several ways to manage an overdue invoice without compromising your professional relationship with your client.
10 step action plan for chasing late invoices:
It’s not Rude To Chase Your Invoices
In the early days, it can feel rude to contact a client to ask for payment on various occasions, and you might let small payments slip to avoid the risk of losing them as a client. As you become more experienced in business, you come to understand that chasing invoices is all part of running a business, you’ve delivered a service and they need to pay for it.
Set Payment Terms Expectations Early
No one likes to talk about money but setting the client’s expectations by discussing your payment terms early on can prevent problems further down the line.
Explain when you will invoice the client and what the payment terms will be. Most small companies tend to opt for a 30-day payment term, while larger companies might be happy with 60.
Warn your Clients About Interest Charges on Late Invoice Payments
Government legislation has been introduced that allows small businesses to charge up to 8 per cent interest plus the Bank of England base rate on late payments. They can also pass any debt recovery costs onto the client.
However, you should warn your clients from the off that interest will be charged if your invoices are not paid on time.
Don’t Work Yourself Up
When a payment is not made on time, the temptation is to think the worst and assume the client is trying to get away without paying. This is rarely the case. In most instances, the client will have simply forgotten to pay or have a prescheduled date when their payments are made.
Instead, we advise you to wait a couple of days after the payment was due before sending a polite reminder.
Send Them a Late Invoice Letter or Reminder
Your initial payment reminder should be polite and written in the right way. Simply stating that the payment is now overdue is often enough to prompt payment.
Send a Statement of Outstanding Cost
If no payment is forthcoming and you do not receive a response from the client asking for an extension, you should then send another email. This time explain that the invoice is now overdue and include a statement of the outstanding cost.
Give them a Polite call to Chase Payment
It’s a lot easier to ignore an email than it is to dismiss a request for payment made over the phone. If you have followed the advice above and still haven’t received the money, you need to speak to the client to ask if there’s an issue with the payment.
It may be that the client is experiencing cash flow problems of their own and wants additional time to pay. However, putting the client on the spot in this way should give you a clearer idea of their intentions, and help you decide what course of action to take next.
What if They Still don’t pay the Invoice?
If the client still doesn’t pay, then you need to continue to chase. Don’t let it consume your life or take too much time out of your working day, but make sure the client knows you are not willing to let it lie.
If payment is promised, ask for the date it will be made by. You should also cease all work for the client until the invoice has been paid.
Hire someone else to chase for you
Having someone else that doesn’t have a relationship with the clients makes the demand more formal. This person can also hold the client accountable and keep in contact with them when they say they are going to pay.
Should I Consider Legal Action for Unpaid Invoices?
If they still haven’t made the payment you may need to consider more drastic action like taking County Court action. A County Court Judgement against a company can adversely affect the credit rating of a company for six years. Often the threat of a CCJ will get the desired response within the processes 28 day period.
Jaxstar Solutions is a valuable resource used by Small Businesses and Corporate organisations to help in the day to day running and operational side of their business, enabling them to get back out there and do what they do best…sell their products and services to make money.