A business’s accounts receivables and its timely collection ensures that the financial obligations of the business will always be met. If there will be any interruptions in the cash inflow, then contingency plans should be in place to avert any potential problems that may arise from the interruptions.
One of the biggest struggles in running a business would be having to collect unpaid invoices from customers. There is a wide array of reasons as to why invoices may be unpaid and customers may be giving all sorts of reasons, and sometimes excuses, not to. So how should a business deal and chase unpaid invoices due from your customers.
1. Raise the issue.
A business should not hesitate to raise the issue with their customers when an invoice already becomes demandable and overdue. A client may have inadvertently forgotten to pay despite notices due to some procedural lapses in their payment schedules and would just need to be reminded. The earlier you can notify your client of their overdue invoices, the sooner you can collect after a good talk with them.
2. Follow your company’s procedure for collection and make sure you follow up.
It is important that the business has a regular collection schedule of outstanding invoices in order to ensure that cash inflow would be intact. Collection procedures should be followed to the letter and make very polite follow up calls a couple of days before your clients’ respective due dates in order to ensure a timely collection of these outstanding invoices.
3. Give early payment discounts and charge late payment fees.
Businesses may give early payment discounts in order to encourage clients to pay early and ahead of their due dates. It is common for businesses to offer around two percent discount if full payment is made in ten or fifteen days. Although there are businesses that are not enticed by incentives like this, they may be wary about late payment fees that can be imposed if the invoice is paid late. Late payment fees may range from five to ten percent of the total invoice amount which could be a lot if left unpaid. Once collected, these fees will help mitigate expenses that the business would incur in its own payment of its financial obligations.
4. Send invoices right away.
There are times when you tend to forget to send out invoices to your clients and this is especially true for small businesses. Sending your invoices right away right after the transaction is completed will help keep your invoices tracked for follow up and collection.
5. Discreetly use third-party agents for collection.
There are companies that would readily and willingly engage the services of a third-party collection agency to help them collect outstanding invoices from their clients. It is to be noted that it is perfectly all right to engage their services as it provides an added level of protection as a collection partner of the business.
6. Report and contact the business bureau.
If a client has been late in paying off their invoices, it would also be a good move on the part of the business owner to report such delays with the business bureau. No business would want to be reported to the business bureau because of the negative impact it will cause to your client’s business records and can eventually damage the reputation of your client as an entity that does not pay invoices on time. Almost always, a notice from the business bureau would get your invoices paid.
7. Set up a payment plan for your customers.
Especially now when businesses are suffering from different levels of setbacks in operations due to the ongoing pandemic, it would help to arrange a payment plan with your clients who are unable to pay their invoices at this time. You help your client and you help the business, too, in one way or another.
In the end, it is all about being able to plan for accounts receivable tracking and trying to mitigate losses due to non-payment of invoices by your clients.
