Dealing with late payment and unpaid invoices is frustrating and something that no business owner enjoys spending time on. However, regardless of the size of your business, unpaid invoices aren’t just an inconvenience, they can have a major impact on the running of the business. It is important therefore to have robust strategies in place so that late payment won’t threaten the very existence of your business.
- Don’t just jump at the opportunity of a new client. Carry out your due diligence on any new client before accepting them on to your books.
- When do you take on a new client, ensure you have agreed contracts and T&Cs in place with clear payment terms, so that you have something to fall back on if payment is not made on time.
- Prior to starting work, especially with a new client or a large contract, request for payment (or at least a deposit) to be made up-front.
- Invoice immediately once work has been carried out, with your payment terms, and bank details, as well as information on late payment interest.
- Before contacting a client about late payment, make sure you have the right details. Are you sure payment has not been made? What are the payment terms of your contract with this particular client? Review your recent correspondence with this client in case they have informed you about a change to payment plans.
- If a client has not paid you on time, assume good faith initially and do not go in all blazes accusing them. Start off with a casual reminder to them, and if you don’t get any joy, follow up with an email to them / their accounts department asking when payment will be made.
- Another way to handle late payment and unpaid invoices is to use a debt collection agency, who will do all the chasing for you.
- If your client refuses to pay, then you may need to take things further and contact a solicitor.
As frustrating as it can be, always keep your emotions in check if you are chasing a client for payment. The best way to prevent yourself running around after late payments and unpaid invoices is to have robust credit control procedures in place. Late paying clients are liabilities, not assets, so think carefully about who your clients are.
From invoice-chasing software to smart invoice tracking and automated payment reminders, using an online accounting software system like Xero, can make it easier for your customers to pay you and keep your cash flow positive.