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How Do I Get My Outstanding Invoices Paid?
This blog’s recent post suggested books for inspiration during challenging times. Perhaps the most challenging but vital task for small business is how to collect on outstanding invoices.
Sure, it’s a cliché to say that ‘cash is the lifeblood of your business’, but there’s a reason some sayings get so popular they become clichés. They’re true! And here’s another: The longer an outstanding invoice remains unpaid, the more likely the client is NOT to pay it at all. So how can you get clients to pay and pay sooner?
First, what’s the difference between outstanding invoices vs unpaid ones?
On the surface, there is no difference, but details matter. In each case, you’ve billed a client and have yet to receive their payment. The difference comes when that invoice is ‘past due’ or, more simply put, ‘late’.
And it’s late when the client hasn’t paid you by the due date you assign on your invoices. So assign one. Most people work best to a deadline.
Ask to bill upfront.
The most sensible advice you’ll find out there is to invoice partially, say 50%, upfront. Good clients will be happy to take a leap of faith when you’re demonstrating the same. (Some bloggers suggest billing for the project ahead of time and not starting work until the payment comes. Like ‘buy low, sell high’, it’s solid advice but almost impossible to practice. Especially if you’re a new player.)
Don’t be afraid to ask. It actually makes you look professional and not desperate. Remember the agreements guidance from the last suggestion on our list of inspiring books: Don’t make assumptions! Ask, ask, ask!
Besides, if the client doesn’t agree to pay something up front, they may also be unwilling to pay later when the invoice goes from being outstanding to overdue. And maybe you’re better not accepting the contract in the first place. But that’s your call.
Next question: how to ask for payment on outstanding invoices?
Never feel apologetic about asking for payment when you’ve completed agreed-to work, executed in good faith. But just how do you get clients to pay invoices? Psychology.
There’s a reason business people use other clichés, like saying ‘I’m in the insurance game’ or ‘the advertising game’.
Ask any entrepreneur. Much of business is playful and sporting. Just think of all sport expressions we use day to day, from ‘slam dunk’ to goal. Now play. Level playing fields are important but sun in your opponent’s eyes? That’s a matter of efficient planning and execution!
There are many clever ways you can gently assert advantage, but the first is to adopt the tone of a referee. Meaning? If cash is a business’s lifeblood, unprofessional sounding email with typos and improper punctuation is a sharp piece of glass, bleeding out your reputation. Take twenty minutes to practice the craft of business writing.
A professional tone always sounds neutral but gently persuades. And pays.
‘Nudge’ quicker payment by labeling your invoice ‘Due Upon Receipt’
Offer no waiting period. As soon as you send the bill, they are technically obliged to pay. And a good client will respond to overdue billings.
Mind, not all clients are so responsive. And some may ask you to agree to 15-, 30- or even 60-day grace periods. If you’re a small business and they’re an important client, you may not have any choice.
You can further ‘nudge’ them into payment on time by indicating a late fee that scales higher over time. Likewise, you could offer a rebate for early payment.
Be explicit with your carrot: beneath the bolded grand total, highlight ‘Receive a 2% Rebate If Electronic Payment Arrives Within 5 Business Days.’ Or your stick: ‘A 5%-Late Fee Increases Weekly by 10%’. Hopefully, it needn’t come to that.
Send your final invoice minutes after the project finishes.
Remember ‘the game’. When your client is happily distracted by your completed work, they’re more likely to respond positively and quickly to your bill. Deliver the bad news after giving the goods.
Don’t delay. Think how quickly a few clouds can kill the mood on a sunny day. If you finish the project and get it to the client on Wednesday afternoon, be sure your invoice is in their inbox at opening time on Thursday morning.
Be proactive with reminders.
If your invoice is coming close to its due date, send them another email, reiterating the date, plus with the original invoice re-attached. The cliché that it ‘got lost in the mail’ (and the modern busy-person’s equivalent, ‘my inbox is a mess, can you resend it?’) is harder to throw out when they have several copies at the front of their messages from you. Send one more in the same friendly tone on the day it becomes overdue.
Form habits. Tell the clients that it’s your practice to follow up on unpaid/outstanding invoices, say, on the 1st and 15th of each month as an essential part of your business life. Better still, schedule your reminders on the first day of the week. So, the day after a holiday Monday, you’re still following up on monies owed!
Be gradually tougher, but still polite, with overdue invoice reminders.
So, you’ve reminded them with a reattached bill with the total bolded, then the deadline arrived but the money didn’t. First, send a polite but short note reminding them. Try this:
Good morning, Mr. Client.
Your invoice #XX for $XXXX.xx is due today. Please note that a weekly 5% late fee increases the grand total to $YYYY.xx now.
We charge the incremental fee because we need to pay our own suppliers and staff.
For your easiest convenience, please email funds to our bank today: Accounting@MyOwnCompany, or you can courier a cheque to 123 Address Street, Cityville, M0OV1T.
If you get no response, send a weekly reminder twice before escalating. Follow up the third reminder with a phone call.
You can always be polite but firm and honest. You’re not helping the relationship by pretending everything’s OK. Never be afraid to ask, ask, ask. You’ve worked too hard to give up now.
In the meantime, consider advancing your capital by funding an invoice with FundThrough. We offer innovative solutions that get you paid in days instead of months. See if you qualify for our invoice funding solution, or contact us at [email protected] or 1-800-766-0460 to get started.