Overdue Invoices: How to Manage Late-Paying Customers

If your small business relies on an invoicing payment system, you’re probably familiar with late-paying or worse, non-paying customers. There are various reasons why some customers do this, from unanticipated extra expenses to lost bills.

However, lots of business owners find asking for overdue payment challenging because they simply don’t know how to broach the subject without sounding rude or aggressive. But regardless of your delinquent customers’ situation, unpaid invoices put a dent in your cash flow and operations of your content marketing company.

Being candid with and respectful to your customers and having solid backup strategies is key to help curb late payments. Consider these handy tips to avoid and handle late-paying customers:

  • Draft a statement or contract of work that clearly details your payment terms. This should include the payment deadline and the various ways you receive payment. Use clear and simple language, with no room for misinterpretation or ambiguity. For instance, rather than “Net 10”, use “Payment due”.
  • Customers may require specific details on invoices like line item descriptions or PO number. Make sure to have this information ready to avoid delays.
  • Send your invoice as soon as you complete a project. Most customers prefer invoices sent by email, which is quicker and provides all parties with a digital record of the transaction.
  • If your customer outsources their accounts receivables to an online accounting company, have all necessary details ready even before you send the invoice. Some of the online services come with complicated approval and registration process, so starting as soon as possible will help you prevent delays.

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  • Consider offering incentives for customers who pay with cash or for those who pay their invoices early. Likewise, consider requiring late-paying customers to put down a partial payment upfront so they’ll know you mean business.
  • Clearly state in the invoice when clients will be fined with a late fee and how much the late fee is.
  • Keep track of late-paying clients. Make sure that records are always updated so you can monitor average pay times for all customers and which ones pay late habitually. If you’re not using one already, consider using accounting software that will enable you to balance sheets, cash flow statements, and income statements easily. These will help you keep on top of your small business’s financial picture, and spot potential issues before they become more difficult to manage.
  • Always follow up on late payment promptly. Call the customer or send an email asking about the delay in payment.
  • When following up on late payments, besides asking why the payment is late, try to propose a solution that will benefit all parties. If you’re considering proposing an adjusted payment schedule, try to make it fair, but not too long. Make sure to keep records of correspondences with the late-paying clients, invoices, your attempts to ask for a payment, and contracts. You will need these records in case the situation ends up in a lawsuit.
  • If a customer owes you a significant sum and doesn’t want to pay based on your invoice or contract’s terms, you may need to litigate. You can likewise take your claim to the small claims court. With both options, however, make sure that the amount you could potentially receive from the case is worth your money and time. The amount should also satisfy state requirements. You’ll also need the services of an experienced lawyer.

If you find that a certain client is habitually late with payments, you can either stop dealing with them altogether or halt sending products or providing services until they’ve paid their balance. Otherwise, follow the tips above to help make sure that you get paid on time while maintaining a mutually beneficial business relationship with your customers.

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