Common Mistakes That Lead To Unpaid Invoices & How To Avoid Them
Unpaid invoices can be a frustrating problem for any business.
They can cause cash flow issues, increase administrative burdens, and strain relationships with customers.
With the average SME in the UK being owed £68,413 in unpaid invoices, the soaring numbers of company insolvencies we’re seeing should be no surprise.
Thankfully, there are steps you can take to help avoid the risk of not being paid.
Having helped companies with unpaid invoices for over 16 years we have seen it all when it comes to businesses not being paid on time.
Here are the most common causes of unpaid invoices and how you can avoid them:
Inaccurate or incomplete invoices
You would be surprised at the amount of invoices we see that either have incorrect information or are incomplete.
At the very minimum your invoice should include:
- Itemised breakdown of the goods/services provided with a brief description for each.
- Total amount due.
- Payment due date or credit terms.
- Date the invoice was issued.
- Invoice reference numbers, this will be unique to each invoice.
- Your company and contact details.
- Your payment details and instructions on how you can be paid.
- VAT number where applicable.
Ensure that your invoices contain all necessary information, are accurate and double-check for typos or errors.
We see so many invoices disputed because of errors or incorrect information provided on an invoice.
Sending an accurate invoice promptly will also help you get paid quicker!
Payment disputes
Linking us nicely from the point above, disputes will always result in your invoice being paid later, if it is even paid at all!
Communicate with your customers about any potential disputes or issues with the invoice before the due date. Try to resolve any concerns as soon as possible to avoid delayed payments.
Disorganised billing systems
Implement an efficient billing system that allows for easy tracking and management of invoices. Accountancy software will help you log each of your invoices and easily keep tabs of which ones have been paid.
The great thing about accountancy packages is the apps that can seamlessly plug in and super-charge your business finances!
Our partner Know-it automates the complete credit control process and easily connects with your accountancy software to automatically chase your unpaid invoices using a fully customisable schedule.
Payment terms confusion
Clearly state your payment terms on your invoice and ensure that your customers understand them. This can include due dates, penalties for late payments, and preferred payment methods.
Find out more about adding late charges such as interest, compensation and debt recovery costs here!
Or, use our free calculator and find out how much in late payment charges you can legally claim on your overdue invoices.
Cash flow issues
Understand your customer’s payment patterns and plan for cash flow accordingly. Consider offering incentives for early payments or accepting partial payments to help alleviate any financial burdens on your customers.
Follow a credit control process to reduce late payments
Credit control is critical if you want to avoid unpaid invoices.
But as we see time and time again, a robust credit control is not very common.
Here are some basic steps you can start following today that will significantly reduce the amount of time you spend waiting for an invoice to be paid.
Credit check new and existing customers
A business credit check will let you know of any risks to your cashflow if you accept an order based on how likely a company is to pay you on time.
As well as a business credit score and rating you’ll also see a credit limit that will allow you to set an appropriate credit limit according to credit risk.
Monitor for any changes
Credit scores and limits can change so you should always monitor your customers for any changes to their credit report so you can change credit terms and adjust credit limits.
Have a series of payment chasers ready to send
When payment isn’t made on time you’ll need to be pro-active and chase your unpaid invoices.
Our advice is to have multiple chasers ready to send depending on how overdue your invoice is.
We dig further into this topic in our article on chasing late payment with letters & emails.
Know-it automates the complete credit control process for you, with credit checking and monitoring, automatic payment chasing and more all in one place! Plus it’s free to sign up!
Have an option for recovering overdue invoices
In extreme cases all of your efforts may not encourage payment, but don’t worry too much.
In these instances, it’s time to call in the professionals such as Darcey Quigley & Co.
Believe us when we say there’s not an excuse we haven’t heard or scenario we haven’t come across before, having collected unpaid invoices from all seven continents across the world.
Why choose Darcey Quigley & Co to recover your unpaid invoices
- We operate on a no win, no fee basis.
- Cases actioned within 1 hour with 48 hour turnaround.
- 93% success rate recovering overdue invoices.
- Fees starting from just 3%.
- Recover late payment interest and compensation on your behalf with an 89% success rate recovering additional charges.
- UK & International coverage.
- Rated 5 Stars on Trustpilot.
By taking steps to avoid these common causes of late payments, you can improve your cash flow and build stronger relationships with your customers.
Meet our credit management and commercial debt recovery content writer, Declan!
With a keen eye for detail and a passion for educating others, Declan is committed to creating informative and engaging content that empowers readers to get a firner grasp of their credit control to improve their cashflow.
Connect with me on LinkedIn!
