5 top tips to recover your unpaid invoice

Do you have an unpaid invoice (or several) and you need to deal with late payment?

Your business is your livelihood.  You took the leap and firmly placed your future in your own hands. Right now, it feels like someone else has the ability to influence your future – your debtors.  So first some objectivity.  You are still firmly in control of the financial destination of your business and we are going to give you the tools to help you stay that way.

As a business owner or SME, you know that the long term future of your business is reliant on cashflow.  Which means you also know that getting a good night’s sleep is, in part, reliant on your customers paying their invoices on time! 

Chasing payment

Credit control is often close to the bottom of a long list of business priorities for business owners and SMEs.  Chasing payment is always time consuming and for some, uncomfortable.  However, it’s a necessity to keep your cashflow healthy (and your business afloat).  But don’t forget, there are several options available to you to recover your unpaid invoice.  It is worthwhile spending five minutes to consider your options to make sure you take the right action for you and your business.

For now, let’s assume you have chosen to spend some time chasing the unpaid invoice yourself.

Getting it right

Maintaining a good relationship with your customer or debtor is important (they’re fairly integral to your cashflow!). But so is getting that overdue invoice paid. As a debt recovery agency, we work with many businesses recovering their unpaid invoices.  We also work with businesses to advise them on how to go about chasing payment themselves.

Here are our top tips to help you improve your chances of recovering overdue invoices yourself (and feel more comfortable and confident with the process):

Top tip 1: Check that your customer has received the invoice

It’s obvious, but always check that the customer has received the invoice before you begin chasing payment in earnest.  This helps to avoid a common stalling tactic further down the line.  If they tell you they haven’t received it, send a paper/email copy the same day and ask them to acknowledge receipt.

Top tip 2: Check whether there are any queries on the invoice

Checking that the customer is satisfied with the service or product they received is vital.  It takes you one step closer to securing payment of the invoice.  It also demonstrates your commitment to high standards within your business.  It may also help secure their future business if they have encountered a problem.

Resolve any issues immediately 

If there is an issue with the service or product, resolve it immediately.  If it warrants a discount to the invoice, raise a credit note to remove the agreed disputed amount.  Or, if necessary, remove the entire original invoice from the ledger.  Make sure the aged debtor report reflects the true financial position of your business.  This will save you headache further down the line!

Top tip 3: Pick up the ‘phone

In the first instance, a telephone call to the customer is preferable to an email/letter. It keeps the initial reminder informal and friendly.  Follow up the telephone conversation with an email/letter. Always include a reminder of your bank details for payment together with a copy of the invoice.

A paper trail is crucial

If payment is not forthcoming, a paper trail of your efforts to secure payment will support your case if required later.  Here’s a handy template email/letter: Debt collection correspondence following prompt 1

Top tip 4: Establish a timeframe for payment

If payment is not made following the first telephone reminder, make that second call.  Always provide a clear time frame for payment of the overdue invoice so all parties know what is expected of them.  Here’s a template for that follow-up email/letter: Debt collection correspondence following prompt 2

Reasonable time frames for payment

  • Payment within a week following the initial call is a reasonable expectation.
  • After a second prompt, three days is a fair time frame.
  • The third and final prompt, by email/letter, should be accompanied by a request for payment within two days. At this point, you may want to use very specific wording to concentrate the mind: Debt recovery correspondence following prompt 3. You should make your intentions very clear should the debt not be settled within the stipulated timeframe.

Don’t forget, you are within your rights to add Late Payment Interest to the unpaid invoice as well as any charges outlined within your Terms & Conditions.

Top tip 5: Be proactive, be consistent

In every instance, if payment has not been received by the time the stipulated timeframe has expired, follow up with the customer.

Demonstrate that you are serious about recovering the outstanding invoice: be proactive, be consistent.

This is an effective process but for one reason or another, your invoice might remain unpaid.  At this point you need to consider next steps.  There are a number of factors to take into account before making a decision – here’s the benefit of our experience.

We hope you have enjoyed this article.  If you would like to read about other issues which could affect your business, please visit www.colligant.com

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