Lessons In How To Collect Your Unpaid Invoices
Debt collection is a subject no business likes to talk about, but it’s important to know how to handle customers who are withholding payment from you for unpaid invoices.
Here we share lessons from the very best in the commercial invoice recovery business. Our founder and CEO of Darcey Quigley, Lynne, shares five lessons she has learnt from her 25 years’ experience of recovering overdue unpaid invoices.
Do not be afraid to approach your customers
Not everyone likes to ask for money, it can feel uncomfortable for some and more of an inconvenience for others. I mean, why should you need to ask for payment that is overdue? Surely it should be paid on time like clockwork, right?
Unfortunately, this is not always the case. When invoices are overdue you must take action and enquire as to why payment has not been made on time. Otherwise, your business will soon run into some severe cash flow problems.
First and foremost, you need to approach your customers about their accounts payable. It is important not to go on the offensive right away when approaching customers about payment. Be empathetic as there could be a number of reasons why they have not got round to paying you such as financial difficulties.
It might even be the case that your customer has not even realised that they have outstanding invoices with you.
Have a process in place for chasing unpaid invoices
Many business owners do not have a process in place for chasing unpaid invoices or sending payment reminders.
This is a huge mistake.
A well thought out payment chasing process allows you to keep on top of unpaid invoices, log when you expect to be paid and understand how long it typically takes your customers to pay you.
It is always best to send a payment reminder when your due date is coming up. A gentle reminder will bring your invoice to the front of your customer’s mind and reduce the chance of it being missed.
But you should also have payment chasers prepared for when your invoices are overdue. Here is an example of a typical payment chasing schedule:
When an invoice is overdue by a couple of days, send 1st chaser.
When an invoice is overdue by 14 days, send a 2nd chaser.
When an invoice is ignored after repeated chasers, send a final notice.
Putting together a payment chasing process does not need to be complicated. We even have late payment chaser templates that you can download for free to get your invoices paid quicker. These free templates cover your initial payment reminder right through to a final notice!
Want to learn more? Take a look at our handy guide to sending payment reminders chasing late payment.
Accurately check the creditworthiness of a customer
The risk of late payments can be greatly reduced before an invoice is even created by running credit checks on companies.
A credit check will give insight into a business’ payment behaviour, allowing you to see if they have a history of missed payments and therefore how much of a risk they could pose if you grant them credit and they default on payment.
County Court Judgements (CCJs) will also show in a good credit report as these are a huge red flag when assessing the credit risk you would be exposed to if you decided to offer a business credit.
It can not be over-stated enough how big of a part good credit reporting plays in a good credit control process and reducing the amount of unpaid invoices.
Stay on top of your invoicing
If you have a strong and consistent invoicing process, late payments and payment evasion will be less likely to occur.
It can be easy to get muddled up with invoice paperwork and lose track of who has paid you and who has not.
Staying on top of your invoicing is key to managing your payments and your cash flow. If you have many customers, this may seem like a hopeless endeavor where you are always playing catchup. However, there are many automated systems in place that can give you a helping hand with invoice generation and distribution. A few of the leading invoice providers for small businesses include Xero, Sage, QuickBooks and FreeAgent.
Get help from the experts when you need it
It might feel intimidating or uncomfortable to approach a third-party debt recovery company. However, if you are unable to recover your unpaid invoices from late payers, getting a helping hand from the experts can go a long way towards getting the job done.
Here at Darcey Quigley our team are experts in pre-litigation debt collection. We specialise in telephone commercial debt recovery and have over 25 years of expertise in the area. With a proven track record and professional approach Darcey Quigley are the UK’s most trusted commercial debt recovery company. Get in touch with our team today to find out how we can help you recover your commercial debts!