How to Chase Overdue Invoice Payments
- The best way to avoid payment delays is to have a clear payment policy in place and to follow up with your clients early and often.
- When chasing invoice payments, it's important to be persistent in your follow-ups while also remaining polite and professional.
- Set up automated reminders for failed payments or unpaid invoices to reduce work for your team, and make things easier for clients.
Sarah has always dreamt of having the freedom to produce advertising campaigns that reflected her own creative vision. After almost 10 years working at an advertising company, she took a leap of faith to start her creative agency.
The first few months were a flurry of activity. Sarah worked tirelessly to build her personal brand and eventually secured her first few clients. But her joy was short-lived.
Some of Sarah’s customers who usually make prompt payments were now dragging their feet. As such, she spent more time and energy chasing overdue invoices than she did working on campaigns or marketing her agency.
Invoicing a client and then chasing after them for payments isn’t sustainable for Sarah or any other business owner. It affects your ability to focus on revenue-generating activities.
The challenge Sarah faces is prevalent among SMEs. According to a Quickbooks survey, mid-sized businesses in the US waste an average of 14 hours per week following up on late payments. To put this into perspective, that’s almost two full working days spent chasing invoice payments.
No one enjoys chasing clients for unpaid invoices but if you don’t, you may never receive payment. So when a client is not paying their invoice, how do you manage the situation?
That’s what you’ll find out in this article. Here are four effective tips you can employ that ensure you get your payment on time when chasing invoice payments.
1. Set early expectations for invoice payments
When someone requests your services, it’s important to set expectations before signing a contract. This will ensure that everyone is on the same page from the start.
To prevent any issue from arising, clearly communicate your payment terms by providing vital information like:
when you send invoices
the services you rendered
the payment due date
the payment method
Also, it’s best to ask customers if they have any payment policy that may delay your payment. For example, some companies usually have a policy of paying invoices after a 30-day period. So it’s only normal to wait until after 30 days before the chasing begins.
2. Inform clients about interest on late payments
When setting expectations, be clear about the consequences of late payments. Some customers may delay payment unless they know there’s a penalty. To avoid this, communicate your late fee to them in advance.
In some countries, the law allows you to charge interest for late payments. For instance, the UK government allows small businesses to charge up to 8% interest plus the Bank of England base rate on overdue invoices.
As such, when customers know that they’ll pay a certain amount of interest on late payments, it encourages them to clear invoices faster.
Pro tip: Offer discounts on early payments or waive certain fees if clients make payments within a certain time.
3. Send a friendly reminder
Sometimes, clients get so overloaded with work that they forget to clear their vendor’s invoices. Thus, sending a simple reminder may be what you need to get paid on time.
In fact, you don’t necessarily have to wait until the agreed date to send a reminder. You can proactively remind customers of their payment a few days before the deadline. This will help to ascertain the information on the invoice and curb any potential issues.
But if a payment is past due, follow up promptly. Businesses that follow up with 90% or more of their invoices are the most likely to get paid within a week of their invoice due date according to The 2022 Late Payments Report from Chaser.
After sending a friendly reminder, you will most likely receive your payment or get an explanation for the delay.
4. Automate sending unpaid invoices
Manually sending texts or emails to remind everyone about their overdue invoices is stressful, time-consuming, and unproductive. Even worse when you deal with lots of clients.
To make your chase easier, automate sending invoices using tools like Service Provider Pro (SPP). You can customize the email template for the invoice reminder email, and decide how many emails per day you want to send.
How long do you wait before chasing invoices?
Besides impacting your cash flow, overdue invoices can have an effect on your mental state. It causes unnecessary anxiety and increased stress levels because you’re worried about how to pay monthly bills, rent, tax, and staff.
As such, you don’t have to wait too long before chasing invoices. You can send a polite reminder a day after the three days to avoid being kept in the dark.
This shows the customer you keep track of invoices and payments, and you’re serious about getting paid on time as stated before signing the contract.
Some clients may have genuine reasons for not making payments on or before the due date. Thus, ensure you keep it simple and polite to avoid straining the business relationship.
When sending reminders, ask if there will be a delay with clearing the invoice and if there’s anything you can do to help. Also, if you send them via email, re-attach the invoice for reference.
Here’s a sample reminder template:
I hope this email finds you well.
This is a gentle reminder that your invoice [Invoice Number Here] was due three days ago. I’m checking to see if everything is okay or if there will be any delay in payment.
In case you didn’t receive the invoice, I’ve re-attached it for reference. Let me know when I can expect payment or if there’s anything I can do to help.
If you don’t get any response, send a follow-up email after seven days reminding the client of the unpaid invoice and reiterating your pledge to help if there’s any need.
However, if you’ve still not gotten a response on or before the 30-day mark, send another reminder and include the consequences for late payment provided you had such an agreement with the client before signing the contract.
What to do when an invoice remains unpaid?
Nothing is as frustrating as sending constant payment reminders to clients but all you hear is crickets even after 60 days.
If it gets to this stage, then it’s time to escalate the issue. Here are some strategies you can use to ensure you get your payment.
1. Call the client
When an unpaid invoice issue arises, some customers are usually polite enough to communicate the reasons for delayed payments. As such, you can continue sending reminders to ensure they clear the invoice as soon as possible.
But when you don’t get any response via text or email, the next step is to call the client. Following up with a call shows you’re serious about getting paid. Also, you can explain how the overdue invoice is affecting your business, find out what’s causing the delay and discuss ways to resolve it.
During this phone conversation, ensure you reach an agreement with the customer on when they’ll make the payment.
Some clients may request to make payments in installments because they are cash-strapped. If this works for you, ensure you send a follow-up email to confirm the agreement.
2. Suspend all services
Let’s assume you provide SEO services for a client every month. It makes sense to suspend working on their website if the payment is long overdue. Remember, you have a business to run.
You can include a clause in your contract that states you reserve the right to suspend services if the client fails to make payments within a certain period. It’s an effective way to get customers to make prompt payments, especially if your service directly impacts their business.
3. Send a final payment reminder
A final reminder is a polite way to inform clients that you’ve exhausted every possible avenue for payment and you’re ready to take legal action.
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If you still don’t get any reasonable response, then you can move on to the next step.
4. Consider legal action
If you’ve exhausted all the options above and the client ignored your final payment reminder, then consider taking legal action.
Legally demanding payment should be a last resort because litigation can be expensive and time-consuming. But when you’re left with no choice, hire a debt collection agency or refer to a small claim court in your jurisdiction.
Doing this may be the client’s final motivation to make the payment.
Frequently Asked Questions
How do you politely chase an invoice?
When chasing an invoice, keep your message simple, and straightforward. Use a polite and friendly tone to remind clients that their invoice is past due and you’re ready to help. You can chase an invoice via text, email, or phone calls. Remember to re-attach the invoice for reference if you’re sending a reminder via email.
How long should you wait before chasing an invoice?
You can wait at least three days after the due date to chase an invoice. This will help avoid being kept in the dark and show the client you’re serious about prompt payments as stated in the contract. If you don’t get a response, you can send a follow-up email after seven days, another reminder after 30/60 days, and call the customer before you consider taking legal action.
Chase payments the right way
Taking care of overdue payments is unproductive and a waste of your precious time. That said, you should also consider the client’s current situation and approach them politely when asking for payments.
If you’re sending reminders via email, use tools such as SPP. They make it easy to send automated emails that remind clients about their overdue invoices. In the end you’ll have more time and energy to focus on other important parts of your business.