In an ideal world, it would be possible for business owners to collect their unpaid invoices immediately they are sent out. But as you already know, this is not as easy as it sounds. Prompt payments are quite uncommon than anyone could ever imagine. According to a survey of twenty million invoices, it was established that 64 percent of small enterprises are affected by late payments on a regular basis. And this not only involves the small businesses but the large ones as well.
It’s always exciting to fulfill a request and send the order to the customer accompanied by their invoice. While this helps to ensure your accounts receivables are handled, it doesn’t actually help your accounts unless the checks and the cash start streaming in. If you happen to experience some difficulties collecting your accounts receivables, then you need to know that there are various ways you can deal with this issue. To ensure your unpaid invoices are well-handled, consider the following:
- Pick Your Battles Wisely
When it comes to running a business, it’s always imperative to carefully select the type of work to take. Often, it is enticing to take any job offer that comes your way, but if you are smart enough, you’ll realize that this is not necessarily the right approach to business. What you need to do is to evaluate your situation and determine whether or not your business will still stand if something goes wrong with the job. If, for instance, the job doesn’t fall through, will your business still be sustainable? Though these instances are rare, there are times when things don’t work out as planned; whether it’s the client demanding a price that is lower than what was initially agreed, or a customer refusing to pay for the products delivered or services rendered. These instances are a possibility in any business scenario, so it’s imperative that you are always prepared by minimizing the probability of them occurring.
To that end, you are advised to screen all your new and potential clients. This process does not necessarily need to be an extensive one, but it’s worth inquiring if they have hired someone in your line of business in the past. If that is the case, you can inquire about the experiences they have had and use their word to improve your own experience. Apart from that, you’ll be in a position to reach out to those they have worked with them in the past, so you can learn what their experiences have been working with the client. This is an excellent way to weed out future problems; if the clients were problematic, then there is a high probability that they may be problematic for you too. You can also ask about their ability to pay their invoices, and if you find out that they are difficult when it comes to settling their debts, then you can avoid working with them.
- Use a Well-Written Contract
One of the best ways to ensure your invoices are paid is to use contracts. Every sale your business makes needs to be governed by a contract that is crafted by a lawyer. This contract should detail all the deliverables, time frames, dispute-handling processes, and payment expectations. Failure to use a contract is often a costly mistake that many business owners tend to make. Without a contract outlining your payment terms, you’ll have little recourse when the clients fail to pay their invoices and you need to pursue legal action.
- Contact the Client
Contacting your client is a part of the process for dealing with unpaid invoices. However, how long should you wait until you contact your customer? It is not uncommon for businesses to ask this question. In most cases, people usually don’t like to upset their clients by appearing too demanding especially when it comes to unpaid invoices. You need to remember that you are running a business, so you should not handle your customers the same way you handle your friends or family.
Positive cash flow is critical for the sustenance of your business, so determining the period it would take to contact your clients about the unpaid invoices will depend on your ability to meet your business’s requirements. Make sure there is a terms of trade that is signed by both you and your client and this should outline how the collection process should be conducted. The terms of trade should detail the costs that could be incurred for the outstanding accounts, as well as the duration it would take for all account to be paid. The terms of trade may also include the frequency of follow up, so the client can know when to expect emails or calls. An automated reminder to the client would also be an ideal way to notify the customers of their outstanding invoice. This technique will help save time, and you’ll discover that the debt is settled as soon as the reminder is sent.
- Send Paperwork Promptly
As soon as the products have been delivered or work has been completed, send the invoice and any paperwork relating to the work. You can also attach the acceptance letter to show that the delivery was in accordance with the contract. Moreover, you need to make sure that you follow the payment process that has been outlined in your contract. If the customer asks you to send the invoice with a copy to the project manager, then you need to do so. Failure to follow the clauses in your contract will most likely result in delays.
- Handle Disputes in a Professional Manner
There are instances when a client fails to pay their invoice not because they don’t want to, but because they have a dispute they need to be resolved. If your customer has a genuine dispute, try as much as possible to make sure it is promptly resolved. This is an excellent approach to ensuring you are able to keep your client.
Nonetheless, some clients “create” disputes to get additional products or work for free. In such cases, there isn’t any actual dispute to solve because the customer is only holding your money hostage to obtain free services. Most credit checks will identify these kinds of clients, but they still exist.
When that happens, send the client a copy of the acceptance letter, and you’ll discover that this technique will easily diffuse the issue. It is difficult for the clients to argue that they’re not happy if the works meet their requirements and if they have the letter indicating that the work was accepted. All in all, while you resolve these disputes, make sure you are courteous and professional.
- Invoice Financing
It can be shocking to see how often businesses write off perfectly recoverable debt. Collecting debt is usually a stressful process, and in most cases, businesses tend to jump the gun and write them off as bad debt. Hiring professionals may appear stressful, but it could actually be beneficial. Perhaps looking for a reliable debt collection agency is a good idea for your business to recover late payments. They can take care of the debt, whilst the business keeps growing.
You may opt for invoice financing, where you sell your invoices to other organizations. This is quite a simple process. In ordinary cases, you would issue your invoices to customers for delivered products or services rendered. Your account receivables are assets on the ledger of your company. In such a case, the total amount that your clients owe your business can easily be bought or sold in the same way you would sell other assets owned by your business. Basically, invoice financing works by allowing you to sell all your outstanding business invoices at a discounted rate to another organization that is willing to purchase them. The greatest advantage to this is that you get your services and products paid immediately, making it possible for you to use that cash flow right away.
You can visit InvoiceFinancingAustralia.com.au for more information about invoice financing.
Whether you like it or not, there comes a time when you’ll come across a client who is stubborn when it comes to paying for services or products. Every business person deals with such issues at one point or another. When you are the one facing these kinds of difficulties, you may find it quite frustrating and may even end up writing off the debts owed to you. No one likes thinking about these kinds of situations, but it’s always important to be prepared for them in case they happen. Remember, following the guidelines given in this article will help you to prevent the frustrations of unpaid invoices. When clients become problematic, you can always sell off such debts as assets to third parties at discounted prices so you can keep your cash flow going. This is the best way to avoid inconveniencing your business and ensuring your operations continue normally.