One of the biggest drains on resources for any business is debt recovery.
Unpaid invoices can be particularly costly, tedious and frustrating, often damaging the ongoing business or customer service relationship of both parties. But it doesn’t have to be all doom and gloom.
Setting up clear and transparent workflow practices from the outset can prevent debt issues from spiralling out of control and help maintain positive business relationships moving forward.
Clarify Invoice Payment Terms and Conditions in Your Initial Contract
Ensure your initial contract is crystal clear on your payment terms and conditions, as well as any legal or interest implications that may ensue upon non-payment. Clarify exactly how many business days the invoice should be paid by, and the consequences of non-payment.
The main goal is to establish your payment terms as directly and as early as possible. This way it is clear to all clients that you take timely invoice payments seriously.
If in doubt, speak to a solicitor to ensure your binding contract includes the necessary terms and the ramifications of non-payment.
Demand a Deposit
Many businesses use the deposit system as an almost ‘token’ payment to secure a booking, service or product. It’s common to request 20% or even 50% of the final invoice upfront. Securing a larger portion from the outset ensures you have less to recover down the track. It also locks your client into a more binding contract with your company, as they have more invested with you and are less likely to move to another provider.
For clients with tight cash flow, an incremental invoicing system can help ensure your mutual payment system better meets their weekly, monthly or even quarterly budget. Using an automated software platform to solve issues and process incremental invoicing can also help alleviate any administrative burden on your business.
Automate Your Invoicing
Save time and effort by implementing software that automatically generates and tracks invoice payments. An accounting and invoicing platform such as QuickBooks Online that integrates with your CRM, marketing and sales platforms will ensure your payment system works seamlessly across your business.
In the event of non-payment, ask politely. Most of the time, invoices fall by the wayside due to time commitments or mere oversight, so don’t be too aggressive in your first contact with clients. Be friendly but firm in your initial correspondence.
Depending on your business relationship, you may want to give a month or even six months to settle the debt. But in the event of complete failure in your communications and their refusal to pay, you may wish to issue a letter of demand. This gives your client a window to pay the debt without escalating the matter to legal proceedings. When drafting a letter of demand, it’s best to seek the advice of a solicitor to ensure the content meets specific legal requirements.
Usually a formal, legally executed letter of demand is enough to kickstart clients into action, but if all else fails, you might have to hire the expertise of a debt collector who has the legal muscle to follow through on the outstanding payment. Pursuing legal action should be a last resort, as it is often costly and time-intensive for both parties.
Patience Pays Off
Despite the frustrations of debt recovery, it is important to keep calm, be patient and ensure all correspondence is firm, professional and within your legal parameters. Aggressive demands, threats and anger will only exacerbate the issue and damage your reputation in the long run. That’s why it’s important to have external debt consultants in conjunction with streamlined automated tools to ensure you deal with any unpaid invoices in a timely and professional manner.
Find out how you can get paid as soon as you invoice by accepting payments with PayPal, credit cards and debit cards.