Unpaid invoices are not only frustrating – they also impact your cash flow and put your business in jeopardy. Here are five tips to ensure you get paid.
- Automate Your Invoicing
Keeping track of unpaid invoices and then sending out emails can be incredibly time-consuming, but there’s a solution these days. Cloud-based financial management software, such as QuickBooks Online, does the tedious task for you. It enables you to easily issue invoices on the go, and then set up automated email alerts to remind clients when their account is overdue. QuickBooks Online also stores your invoices in one place, so you can have a clear picture of those that have not been paid. The software integrates with your bank account, and being cloud-based means you can use it on any device.
- Be Organized
It’s crucial that as soon as a product or service is delivered, you invoice immediately. This ensures it’s also top of mind for the client because the job has just been completed. These days, storing all of your data in the cloud is recommended too as it allows you to easily access your financial records and statements, from any device, anywhere and any time.
- Get a Signed Contract
Before engaging a client, or delivering a product or service, you should draw up a contract, stating the terms and conditions. This must set out the terms of payment, including when the invoice has to be paid. On average, businesses establish a 30-day payment term. You should also consider a late payment policy, in which you stipulate a fee for overdue invoices. Another option is to take a down payment for project work. Many businesses insist on a deposit of 25% to 50% before the project begins, and the balance to be paid on completion. While a contract doesn’t guarantee you will be paid, it’s a formal record, which could help you if they fail to pay and you seek legal help.
- Pick Up the Phone
If automated reminders are still not working, it’s time to escalate the action and pick up the phone. Having a verbal conversation is sometimes all that’s needed to get the invoice paid. If you feel uncomfortable doing this personally and want to add more authority, hire a personal assistant to make the call and do the chasing for you.
- Engage a Collections Agency
If the invoice is at least 90 days overdue, you should consider sending a legal letter or handing the matter over to a debt collector. Collections agencies typically handle payments that are late by 90 days or more, and charge a percentage of the recovery, which can be 15%, 25% or more. There’s usually no charge if they fail to recover the money. Another option is to take your client to the small claims court. While it varies by province in Canada, the small claims court usually deals with outstanding amounts of up to $25,000.
Chasing unpaid invoices is not only tedious and time-consuming, it puts your business at risk so it’s important to know your options when dealing with late payers. For more information, check out this tutorial.