Outstanding invoices? Here’s how to get paid.
Outstanding invoices are a frustrating fact of life for business owners – and they’re often left at the bottom of the to-do list.
But getting paid is essential – and it’s not as difficult as it seems.
It’s all about being polite, but persistent.
Start simple
Often, an outstanding invoice can be solved with a simple payment request or by resending the invoice. Start there, and you might be surprised by how many long-neglected invoices are paid. Firmer follow-ups
If your payment requests are ignored, it’s time for firmer action. Although most people dread making a phone call to ask for payment, it’s actually one of the most effective ways to get an invoice paid. You can also charge a late fee – but this needs to be written into your terms of service before you do the work.
While your merchant service provider shouldn’t charge any set-up fees, they will charge transaction fees. These range from 2-4% of the invoice for debit or credit cards, and under $2 a transaction for direct debit. These fees are an added expense, so they need to be included in your profit calculation – smart accounting software will do this automatically. Because credit and debit fees can add up, many businesses don’t offer online payment for invoices over a certain amount.
Last-ditch options
Of course, some clients won’t respond to polite requests. If you have spent months waiting for payment, it’s time to bring in the big guns. This could mean cutting off services until payment is made, or calling in professional debt collectors or lawyers. The bad news: these aggressive options will likely scuttle your relationship with the client. The good news? You might get paid.
One more option is doing a credit check before you do business with a client. This can help you reduce the risk of late payments and defaults, and even better, minimise the need for awkward or aggressive follow-ups.
Need help clarifying your terms of service, following up on late invoices or writing off unpaid debt? Get in touch for expert support and guidance.
For more check out Xero’s small business guide