Whether you’re a small business owner or freelancer, the responsibility of collecting delayed customer payments will fall to you. It can be a hassle to put in the work for your client, bill them for your time, and end up with an unpaid invoice.
So what can you do if you’re not getting paid on time?
The best way to get paid is to ensure that your clients are trustworthy in the first place. It is always a good idea to collect as much information on potential clients as possible, such as checking their business credit report. This way, you have a better understanding of how your future business relations could play out.
Provide your clients with an incentive to pay upfront, and you could offset the chances of outstanding invoices. Offering a discount of 2 or 3% off the invoice total within the first two weeks of the net payment term can spur your clients into action. Display this in your invoice payment terms to ensure the customer realizes this benefit before the transaction due date.
However, if an incentive does not work, maybe incurring a penalty will. Inform the client through your contract terms that if the pay date comes and goes and they still have not paid, then late fees will be charged to their account.
All business dealings should be made in a friendly and respectful manner. Follow up politely with your clients near the end of the net payment term or grace period to collect unpaid invoices. Send them a friendly reminder email or even a phone call. If you can, you might also try meeting face to face to discuss a payment plan. By being civil and understanding about their past due invoice, you could deepen your working relationship with your client and prompt future deals.
Make the handoff between the client and you as seamless as possible, consider accepting electronic cheques, online transfers, or even setting up direct payment through your invoice. Creating a hassle-free transaction process can help your business obtain what is owed as there are fewer steps customers have to complete. With Quickbooks’ invoicing feature, this accounting software allows you to add a Pay Now button directly in the invoice, providing your customers with the ability to pay in just a couple of clicks!
If the above strategies are not working out, and it looks like your client is unwilling to settle their outstanding invoices, it could be time to reach out to the Ministry of Labour in your province. Such authorities can help resolve disputes and ensure you receive the compensation owed to you.
The Small Claims Court is also an option, as this branch of the Superior Court of Justice handles cases for the payment of money owed. Depending on your province of residents, the court limits the monetary value that can be claimed. In Ontario, it is $35,000, in Newfoundland and Labrador it is $25,000. To use these courts, make sure your claim does not exceed the maximum amount, as they will not recoup losses higher than the stated numerical value.
There is no need to continually keep up with financial tracking when you have so many other responsibilities on your plate. Electronic invoicing programs automatically send out a payment reminder email to your clients and a notification for yourself. This automation allows you to focus on your workload while ensuring your invoices are accurately looked after and kept up to date.
If a customer’s invoice is past due and they incur interest on their outstanding transaction, there is an easy way to calculate the added fee. First, take the number of days the invoice is past due, starting with the day after the amount is due and stop counting on the payment’s postmark date. You can calculate interest by dividing the number of days past due by 365, then multiplying the resulting number by your chargeable interest rate and then the total amount on the invoice.
You should always state in your client invoices the chargeable interest- and check the regulations surrounding interest rates in your province to ensure you do not go over the maximum allowable charges.
If you use accounting software like Quickbooks, then there is a specific category within the application that can track all unpaid transactions. First, ensure you have documentation of all attempts to obtain the client’s overdue accounts. If you do not already have a Bad Debt expense account in your chart of accounts, now is the time to make one.
Next, in the Products and Services list, create a non-inventory item called Bad Debt and select the bad debt expense account on the screen. Alongside the bad debt item, create a credit memo for the customer, which states the amount owed, then save. Open your receive payments and apply the memo to the invoice.
QuickBooks Online helps businesses streamline the invoicing process to make transactions as easy as possible for both you and your clients. Put an end to not getting paid on time. Try our accounting software free today.
Call Sales: 1-888-829-8589
