What should you do when an invoice is past due? It can be awkward to follow-up on an unpaid invoice, but it’s crucial for your Accounts Receivable and cash flow. The best way to ensure payment is received on time is by communicating payment details with the client or customer ahead of time.
You should have a verbal conversation with the client/customer about your payment details and these guidelines should also be listed on the invoice you provide. It’s important to include payment terms like the deadline and preferred payment method, both of which should also be discussed with the client/customer prior to the sale.
Make your invoice clear.
Keep your invoice simple. Be sure to clearly date and label the goods or services provided with details and pricing. If you’re billing hourly, include the total number of hours it took to complete, the price per hour, and then the grand total. Any materials purchased to complete the job should also be listed here. Your invoice should answer any potential questions the client or customer may have.
Choose your deadline wisely.
Determining an invoice deadline is vital - you need to pay your own bills and keep the cash flowing, so take a moment to determine the best timeline for your business. While it may be tempting to request “immediate payment,” that can be confusing, unrealistic, and off-putting. We want the client/customer to continue to do business with us, but we also need to be rational with our timeline. A week? Two weeks? Can your business manage going thirty days? This may have to be adjusted as you become more familiar with your cash flow.
Determine your follow-up.
Make a game plan for past due invoices. How soon after the deadline will you follow-up? We recommend sending a friendly reminder email first, the day after the deadline.
If you notice the client or customer struggling to make a payment, try to offer solutions. Getting some money will be better than getting no money. Some potential solutions could be setting up a payment plan or offering to accept a different method of payment.
Past due invoices can put you in a sticky situation, but it’s all about how you approach the payment from start to finish. Being clear from the beginning will help you get your payment sooner since there won’t be any questions left unanswered. Determine your game plan for past due invoices and stick to it.