Terms of invoicing are one of those things that every small business will have to establish with each client. Talking about these terms early on will avoid any awkwardness further down the line.
Having said that make sure they are indeed responsible for the unpaid invoices. If you contact a client prematurely over unpaid invoices and the fault is with your company you may lose their business going forward.
Double-check your procedures and data are correct:
- payment amounts
- bank details
This is to ensure invoices were actually sent. It’s a good idea to make a copy of these documents, should you need to escalate the issue further down the line. Banks sometimes encounter problems, so a brief phone call should rule out this as a possibility.
Having checked your own procedures, it’s time to contact the client. Its important to contact them early.
It’s also important to consider what the client means to your company:
- How long have you done business with them?
- How strong is your relationship with them?
- How important is their business to you?
- Have they been guilty of unpaid invoices before?
It’s worth considering the above before contacting your client.
First, contact clients through a carefully worded, courteous email 2-3 days after your initial deadline. This maintains your company’s professionalism without harming potential future business opportunities.
It’s important to remember clients are also people. They may have been unable to pay for any number of reasons and your email should reflect this understanding.
If, after a week, there’s still no sign of payment, it is acceptable to start escalating your approach. At this stage, your client is either deliberately withholding payment or simply not prioritising your invoice.
Don’t waste your time. After multiple weeks of silence, your unpaid invoice should be treated as a serious priority. Make regular calls and send letters over the next two weeks investigating your unpaid invoice while alerting your client to the possibility of legal action.
Introducing statutory interest on late payments can also increase client incentive.
If it becomes clear your client has neither the intention nor the means of paying, it’s time to take professional action.
Ideally, aiming to solve your problem through a mediator or by sending a letter of statutory demand may save you some money and time, but frequently a stronger solution is required.
In these cases, court action or even a debt collection agency may be advisable, though remember these actions will permanently damage any future business relationship between yourself and your client.
- Don’t rush into extreme action — make sure you know the full picture first
- Always remain 100 per cent professional – despite your frustrations, you never know how far it might escalate in the long run
- Keep a record of everything
- Gradually persist more frequently — it’s not rude or inappropriate, you’ve provided a service for which you deserve payment
- Don’t be afraid to take the legal route when necessary
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