Resolving Unpaid Invoices: 6 Potent Tips for Businesses

how to resolve unpaid invoices

The effect of unpaid invoices on your business cannot be overemphasized. Apart from affecting functions, it can threaten the very existence of your business. You need funds to keep the lights on in your enterprise and having a truckload of unpaid invoices is a clog in that wheel. Learn more on resolving unpaid invoices: 6 Potent tips for businesses.

Although a common occurrence ordinarily, the outbreak of COVID-19 and the imposition of lockdown in the fight against the virus has crippled a lot of business operations, leading to a surge in the number of unpaid invoices. Just as you, a lot of businesses struggle to get paid by their clients in the light of COVID-19. To stem this unfortunate tide, businesses may need to develop a different approach to invoicing and implement ingenious strategies to avoid the great to business continuity.

Take it Serious (Resolving Unpaid Invoices: 6 Potent Tips for Businesses)

The first hindrance to prompt and early payment of your invoices is how you handle it. A lot of businesses do not handle their invoicing functions because of the mindset that clients should pay. Their thought pattern is that services was provided to earn that payment. However, it does not always work this way.

Money is the fuel that keeps your business’ fire burning and those unpaid invoices are quenchers for the fire. They affect every aspect of your business from interruption of cash flow. This plunges you into not having enough money for business continuity. In more practical terms, this means you cannot pay for supplies, labor or marketing. Unfortunately these are the key to the continuity of your business and maintenance of your brand reputation.

Agreed, it is a very frustrating experience to have to “chase” clients to pay money due to you. However, unpaid invoices are a great threat that you should handle with every manner of urgency and priority. For returning clients, your reputation as a business that handles invoicing with a deep sense of priority will improve your chances of getting paid earlier.

Resolve Reasons for Unpaid Invoices

There is a wide range of reasons that could delay the payment of your invoice. These reasons most times lie with the client. However, a number of times, they also stem from your end. Find out these reasons and correct them.

Clients may not be paying because they misplaced your invoice, the terms for payment are not clear to them, they are not satisfied with the services you rendered, your payment slipped through the cracks, they simply cannot afford to pay at the moment or they simply never intended to pay from the onset. While some of these reasons are a bit strange. Why will someone simply intend not to pay for services you have rendered to them, but it happens.

On the other hand, sometimes you are the gridlock for your own invoice such as when the payment terms are unclear. Once you inquire into the reasons and find out reasons like this. It is advisable you quickly contact the client to provide clarifications and if need be, withdraw the previous invoice and issue another with clearer terms and any other issue resolved. A lot of businesses have observed this tip assisted them in getting paid within two days.

Clear Out Obstacles to Pursuing Payment

Key to getting your invoices paid is pursuing the payment. This is more especially as a lot of your clients are also cash strapped and more often than not, have other invoices to settle other than yours. There are a number of obstacles that seriously impede some business from pursuing the payment of your invoices. You either lack the self-confidence to chase for the payment of your invoices, or you refuse to chase due to the fear of offending certain important clients, or you simply do not want to damage the reputation of your brand by chasing for your own payments. These issues are more common among freelancers as they have to engage clients personally to pursue payments.

You need to address these issues immediately. Switch to the mindset that you have a right to your earnings and the client who fails or has refused to pay you is the one who is wrong. It is not rude to pursue the payment of your invoice. As a Freelancer, you can outsource your invoicing and the tracking to third party invoicing companies. Also, you can appoint a business manager who will be in charge of receivables to clear out the obstacles. Your money is your right and you should pursue it with no holds.

Send a Gentle Reminder (Resolving Unpaid Invoices)

This is quite cliché already. You should remind the client about the unpaid invoice in the most friendly manner. To do this effectively, you can set a timeline for chasers and monitor these timelines closely. Although this is most suitable for clients who only forgot to pay, it also puts subtle pressure on others who are still trying to source funds to pay you. So, once the timeline you set for chasers has lapsed, do not hesitate to send your gentle reminders. It works like a magic to get cash flowing out of your unpaid invoices.

Offer Discounts or Charge Penalties

You can offer a discount for payment of a part of a portion or all of the invoice within a stated period of time. This positive inducement can strongly motivate your clients to pay you faster, so as to benefit from the discount offered.

When you identify clients who genuinely have cash flow issues, especially in the wake of COVID-19, they may be willing to pay a part of the money due to you with discounts that you offer. Also, you can charge penalties on late payment of your invoices. However, you would need to have inserted this in your contract from the beginning of the engagement with the client. Hence, you should study the nature of the client and their attitude towards invoices and where you find it necessary, include the clause for a penalty on late payment of invoices in your contract.

Write Them a Letter of Demand

When your subtle means of resolving your unpaid invoices have failed to yield positive results, you need to send them a formal letter of demand. This will state the work done or services rendered, the invoice number and the amount due to you.

The letter will also remind the client of the terms of your contract and expressly demand payment for the amount due within a specified period of time. Where you desire, you can end the letter with a subtle threat or warning of legal action if the client fails to pay. Although this is a hardball, it is a tool you might have to resort to in getting your money.

Take Away (Resolving Unpaid Invoices: 6 Potent Tips for Businesses)

Unpaid invoices can ruin your business and you should tackle them head-on. Although there are genuinely non-paying clients who do not have the means, there are others who are just being hostile and you need to use stern measures to retrieve your money from them. In fact, there are certain extreme cases that will require you to involve debt collection agencies or consider small claims court. You should always know that getting paid the money due to you is your right and you should take steps to recover it, for continuity of your business.

Resolving Unpaid Invoices: 6 Potent Tips for Businesses