5 Tips For Collecting Past Due Invoices Painlessly
You send your invoices to your customers, each with a clear and specific due date. Yet, when the due date arrives, payment does not.
Unfortunately, unpaid invoices hurt the cash flow of your business. So how do to get your customers and clients to pay AND pay timely for the invoices you send?
Let’s talk about collections!
Often, the thought of collections leads a few to envision a threatening, low life thug with a hairy chest and big hands, dressed in a pin striped suit, who threatens to take a kidney unless a payment of some ridiculous sum is received by sun down.
…or maybe I’m the only one that envisions this?
Fortunately collecting on invoices does not have to resemble a mafia like shake down from the movies. Really, it is about establishing or re-establishing communication with the customers and clients that support you and your business.
The fact is, most of your customers want to pay you. That’s great news!
Let’s discuss how to successfully collect on past due invoices while maintaining a good relationship with your customers and clients.
Photo Credit: Flickr via Creative Commons
Verify That The Payment Is Outstanding
Be sure to get your ducks in a row first!
Do this by ensuring all cash receipts have been deposited and matched to outstanding invoices. When you are sure all cash has been deposited and matched, review the A/R Aging report.
It doesn’t make your business look good if you contact your customer or client about a past due invoice only to realize that payment had already been received. Not to be dramatic, but being disorganized can be the difference between keeping and losing a client or customer.
Send a Courtesy Email
Sometimes the customer or client does not receive the invoice because it got lost in the mail or swallowed up in the spam box. Or maybe the recipient forgot that payment was due.
Whatever the reason, an email to that client or customer is the perfect first step in the collections process.
For you, the collector, an email can be a low stress, low offense act. For the recipient, the email could also be a low stress, low offense act that leads to payment.
Let’s quickly discuss what should be in the email:
The email should be a short, polite reminder, not a nasty-gram. Being nasty actually hurts your chances of getting paid. Remember, the collections process is about maintaining and establishing communication between you and your client or customer.
Here is an example of an email reminder I had sent, on behalf of one of my clients:
Hello,
I'm reaching out to notify you of your past due invoices.
We understand that you might not have received the invoices because they were distributed to another location that was to distribute them to you. We have attached the invoices for your convenience.
Please let us know how we can assist you further with this matter.
If payment for the invoices were sent, we thank you and appreciate your business.
Thanks again, and have a great week!
Best,
See? Not aggressive and not threatening, right? Also, notice there was an offer to assist the customer, and we showed appreciation for their business.
The customer responded to that email almost immediately and notified me and my client that payment would be sent at the end of that business week.
My client received payment a few days later.
Give Them A Call
We live in the age of automation, which includes texting, online chatting, and emailing. That can leave the customer or client feeling like they are just another number. However, when they hear a live voice, it can be the start of a beautiful friendship.
Picking up the phone and calling re-establishes connection with the customer or client. It can also deepen the commitment of the customer or client to your business.
Just sharing my own experience, I was often surprised at how grateful the customer or client was to receive my call. Why? Because they had been trying to get in touch yet did not know how!
Involve Management or an Authority Figure
The person handling your client or customer’s invoicing and billing is not always the decision-maker. Insert me throwing my hands up in the air and silently yelling "NOOOOOOOOOO!!"
Therefore, don’t be afraid to communicate directly with a Manager or the owner of your customer or client’s business.
The authority figure wants to maintain good relationships with other businesses, therefore he or she will do what it takes to make things right.
Also, by involving an authority figure you might be helping your customer or client’s business. Their involvement let’s them know that their business process is potentially broken or that their employee could be dropping the ball. In other words, you’d be helping them, help you.
Be Proactive
You can almost avoid the chasing and begging for your money by doing your part!
Be okay with reminding your customer or client of the future due date. As an example, American Express is great with providing reminders. Sending a reminder can prevent late payments.
Finally, if the customer or client is late with their payment, please do not wait to get in touch. The longer you wait the more difficult it will be to recover the money that is rightfully due to you.
This part of the receivables process is always uncomfortable. However, I hope you understand that collecting is part of maintaining customer and client relationships.
