How to Collect Overdue Invoices Without Hurting Customer Relationships

Imagine a scenario in which all of your customers paid their invoices on time. Your cash flow forecast would be 100 percent accurate year round, you could make key business decisions with confidence and your bills would always be paid on time. However, the reality is that many small business owners struggle with collecting unpaid invoices.

When your customers fail to pay their overdue invoices, it creates a cash flow gap and places unnecessary stress on your business. Keeping up with payroll, vehicle and equipment maintenance and daily operating expenses becomes a challenge. Likewise, finding the resources to pursue new customers and opportunities can seem nearly impossible. The last thing you want is your business’ hard earned money tied up in receivables.

Not to mention, it can be awkward chasing customers for payment. Determining how to best ask for overdue payment without damaging the customer relationship can be a daunting task. Especially if you hope to receive more business from those customers in the future. The key is to adopt a strategy that ensures you get paid, while also minimizing the risk of losing valuable customers.

The next time you are following up on past due invoices, consider the following ways you can collect payment and maintain healthy client relationships:

Send a Friendly Payment Reminder

The first step towards getting a late invoice paid is to send a friendly payment reminder. One of the best ways to do that is to send a polite, professional email immediately after the due date. Let your client know the invoice is now past due, include the payment due date and remind them of the different payment methods you accept. It is also a good idea to include a copy of the original invoice in case it was genuinely mislaid. Sometimes, the reason for nonpayment is as simple as the client being out of the office or the invoice slipping through the cracks.

women holding cell phone at deskSpeak Directly with the Payment Source

If your friendly reminders are unsuccessful, the next step is to pick up the phone and reach out to the client directly or the payment source. Depending on the situation, you might be able to speak with the client directly and inquire on what the issue is that is preventing you from receiving payment. It is important to rule out the possibility that you have been contacting the wrong person, for example. If you have the billing department information, you can also try contacting them to find out more about the status of your invoice and nail down a realistic timeline for payment.

Pause Future Work with the Client

If you have reached this point, it might be time to pause all work with the client until you receive payment. Send your client a message letting them know you are going to cease any further work until they get in touch with you and you receive payment for past invoices.

Sometimes, this is incentive enough for customers to process payment so their project/order can move forward without delay. Putting future work on hold also protects your business from investing even more time, resources and money into a job that may or may not pay.

Outsource Accounts Receivable

Recording, collecting, and managing payments takes valuable time away from running your business. Many growing companies also find themselves facing a cash flow gap when invoices are 30, 60 or even 90 days overdue. If this situation sounds all too familiar, you should consider the benefits of bringing in outside help. For example, partnering with a factoring company allows you to gain immediate access to working capital and assistance with key back-office tasks like invoice review and collections. You not only secure the help you need to speed up the payment process, but also professional services that will strengthen relationships with your customers.

Optimize Your Invoicing Process

It is important to think beyond collecting overdue invoices today. What changes can you make to improve timely payments in the future? Set aside some time to audit and tighten your invoicing process.

Create a policy on how you will handle your customers, from discussing payment expectations upfront to what will happen if they avoid payment.

Make sure you also establish a consistent billing schedule, offer convenient payment options and charge late fees for unpaid invoices. Being transparent and consistent from the start will help you avoid confusion and late payments down the road.

Security Business Capital’s Invoice Factoring Services

Security Business Capital understands just how crippling late payments can be for a growing business. Our dedicated team has years of experience in providing flexible cash flow solutions that help businesses thrive. Our invoice factoring services, for example, allow you to use unpaid invoices to secure the cash you need quickly and easily. With our back office support, you can also significantly reduce the time spent submitting invoices and chasing late payments and devote more resources to accepting new clients and seeking business opportunities.

Our team of experts can help you strike that delicate balance between safeguarding your business’ cash flow and maintaining healthy, long-term customer relationships. Oil and gas services, temp staffing, manufacturing/distribution, and transportation are just a few of the business types that use SBC’s invoice factoring services to generate cash on hand.

To learn more about how our invoice factoring services work, get in touch with us today for a free quote and/or consultation.