What Is the Right Way to Collect Unpaid Invoices?
Obtaining payments promptly is crucial to business success. This leads to steady cash flow, which enables you to pay rent, suppliers, and the salaries of your employees. Here are some steps you can take to ensure prompt collection of unpaid invoices.
Check the Payment Records of Clients
Before offering credit to customers, check out their payment histories. You can do this easily online by obtaining reports providing their credit scores and how long they generally take to pay invoices owed to other vendors. These reports will help you consider what terms to offer your clients.
Delineate Terms in Writing
When you offer payment terms to customers, always delineate time frames, the handling of disputes, and other details in contracts drafted by attorneys. This will clarify what you agreed upon in the event of disputes and subsequent legal actions for unpaid invoices.
Handle Paperwork Expediently
Take care of all paperwork related to unpaid invoices expediently. Have your clients sign an acceptance letter as soon as products are delivered or work is completed. Promptly send the invoice along with a copy of the acceptance letter.
Remain Professional During Follow Up Procedures
When payments are late, call your customers or send reminder emails and arrange for a new payment deadline. If necessary, repeat this process. If your clients have disputes with your products or services, attempt to resolve these with courtesy. As a last resort when customers refuse or delay honoring unpaid invoices, consider obtaining the professional assistance of a collections agency or an attorney so you can get on with the task of running your company.
Strengthen Cash Flow with Financing
Sometimes when you need to offer payment terms to customers, the only way to keep cash flow strong is to obtain outside financing. A business line of credit is ideal, but many companies are not able to qualify for these. Effective alternative methods of funding include asset-based loans and invoice factoring.