Regardless of the size of your business, you might be frequently facing the inconvenience of unpaid invoices. You meet work deadlines, share the invoice with customers on time, but the payment remains unpaid for weeks and months.
A healthy cash flow is important for a business’ survival and success. Overdue invoices often put undue pressure on your company’s cash flow. You spend several days chasing your clients for payment, putting at stake the growth prospects of your business. Chasing money becomes even more difficult when you have to ask for payment without burning any bridges.
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What does one have to do to keep such payments sorted without affecting your otherwise cordial connect with customers?
Here’re the top tips to tackle pending invoices.
- Set the Expectations Right
For every new customer, it’s important that you establish payment terms right away. Remember to inform them when you send an invoice and by when you expect the payment. Most of the companies have the standard 30-day payment cycle, while larger organizations can have a payment cycle as long as 60 days. However, start-ups may ask for immediate payment from its customers as they need strong cash inflow in the beginning of their business.
- Inform your Clients About Interest on Late Payments
Small businesses can take smart steps against late payers by taking help of the legislation. The law allows small businesses to charge debtors interest in case of late payments. The legislation for late payment helps in claiming interest on late or unpaid invoices and also charge valid debt recovery costs.
Charging the interest on overdue invoices is purely based on your relationship with clients. If you don’t want your relation to hit the rock bottom, you can think of other relatively friendly options like sending email reminders to the clients.
- Send a Friendly Reminder
Sending in friendly reminders through emails is a crucial step in handling unpaid invoices. Just attach your invoice in the reminder email to help clients respond with quick payment. Remember to keep your message light, requesting clients to pay the attached invoice. Don’t resort to being aggressive but try to keep it persuasive.
- Follow Up Over Calls
If the invoice remains unpaid even after the reminder email, just connect with your client over call to know the reason for the delay in payment. This will put your client on the spot, where he/ she has to give an idea about issues with payment. The conversation over phone can help you get a clear picture and let you decide your next move.
- Charge Interest on Overdue Invoices
If the client hasn’t made the payment yet, you can try the last resort available to you of charging interest on the pending amount. But, this can only be done when you have maintained transparency about your payment policies throughout. Else, you can have a dedicated staff to chase clients for payments. This can save you from the dreadful work of knocking on your client’s door every time asking for money.
- Finally, Ask for Advance Payment Next Time
Another smart way to lessen the risk of delayed payments is ask for a certain percentage of the upfront cost or advanced payment even before you start working on the client’s requirement. As a small business owner with limited finances, you can easily convince the client about your financial constraint and how the advance payment will help you start working on the project without any delay. Get your customers to pay upfront by guiding them through your company policy of taking advance payment. Convey it unfailingly that he/ she is your valuable client and ask him to believe in your policies.
- Set Up the Best Accounting Software
Aside from adopting these steps to initiate faster invoice payment from your clients, you also need to invest smartly in a trusted accounting software. Accounting software like Giddh can help businesses deal with the stress of tracking every pending invoice. This top accounting software also has the exclusive feature of sending automated SMS and email reminders to clients. Thus, there are less chances of clients missing out on payment dates.