Every dollar tied up in an unpaid invoice is another dollar not going back into your business. The longer an invoice sits unpaid, the less likely it is that it will get paid at all. For every type of business, unpaid invoices cause unneeded stress, and cash flow issues that can have a lasting effect.
If unpaid invoices have pushed your business to the breaking point, hiring a collection agency may be tempting. But after taking out a significant cut fee (30% or more), collection agencies can end up leaving you with less cash than you need and ultimately worse off.
To keep from resorting to a collection agency, try the suggestions below to keep unpaid invoices in check:
- Be clear about payment terms
Don’t agree to a job without discussing payment terms first. These three details should be crystal clear:
- How much?
- What payment method will be used?
- When is payment due?
Knowing upfront what to expect will prepare clients for their financial commitment. Make sure you’re clear about what the client expects from you as well. It acts as a kind of psychological contract between yourself and the client by cementing the expectations on both sides. You’ll also look more professional and will be taken more seriously for future work.
- Send invoices immediately
After a long, hard day on a job, it’s easy to put off sending invoices. However, the sooner you invoice, the sooner you get paid. If you already took care of explaining payment terms, it’ll make this step easier. Be sure to run through the invoice first with your customer then send the invoice as soon as the job is complete, preferably while you’re still on site. Immediate invoicing means you’re much more likely to get paid on the spot as the work is fresh on your client’s mind. Mobile apps like Invoice2go make this process simple so you can send a professional invoice from your device, and if your client is ready – accept payment then and there.
- Send friendly reminders
If your invoicing program doesn’t allow you to set up automatic payment reminders, then it might be time to find a new solution. For some jobs, you may not be face-to-face with the customer when you invoice them, and they might not be able to pay immediately. Before payment is due, set up automatic reminders to go out weekly or biweekly. It will keep the deadline fresh on your client’s mind, and automating it will make sure they don’t feel singled out.
- Make payment (too) easy
If you’re still taking only cash or electronic transfer for payment, that gives the modern-day customer an immediate excuse to not pay you on the spot. Many customers don’t carry cash and hate tapping in details for a transfer. This is an excuse that can easily be overcome by giving them every possible method to pay you. Debit, credit, Paypal, online or in-person — the choices are nearly endless these days. Plus, it feels simpler and more secure to customers if they can simply swipe, sign and be on their way. And you get paid on the spot. It’s a win-win.
Being more proactive about getting paid on time gives you more control over your cash flow, and your business’ future.