It’s The Pandemic, Not Me: How To Deal With Overdue Invoices From Customers
Chasing overdue payments from customers and suppliers is time-consuming and a task that no one enjoys. Unfortunately, the pandemic has caused significant ripples throughout eCommerce, and not everyone has thrived. Stock shortages have been rife, and shipping delays and delivery exceptions have become major stumbling blocks.
As the dust settles and we embrace the new normal, many businesses are still feeling the after-effects of the last two years, which has put many of them on a back foot financially.
If you're battling overdue invoices and your cash flow has taken a knock, try these tips for getting your outstanding invoices settled.
Tips for Dealing with Overdue Invoices
1. Send a Friendly Reminder
When an invoice goes unpaid, it's best to refrain from confrontational language, especially if it's only been overdue for a short time. People often forget rather than intentionally avoid payments. Send a polite, professional reminder with a subject line like "Friendly Reminder: Outstanding Invoice" to get their attention.
Highlight the overdue amount, but maintain a helpful tone. Losing a customer over one late invoice can cost more long-term than sending a friendly reminder.
2. Send a Statement of Account
If a reminder doesn't work, email a statement of account clearly showing the overdue balance. Use an attention-grabbing subject line like "URGENT: Overdue Account" and keep it in a separate email thread.
You can also advise that pending orders won't ship until the invoice is paid since this affects them negatively too. They may decide to pay if they need your products to keep their own business operating.
3. Offer a Payment Plan
If a customer is struggling, offer to split the owed amount into smaller installments over a couple months with a small late fee added. Though not ideal, partial payments are better than no payments at all.
4. Provide More Payment Options
If you only offer bank transfers initially, expand to take credit cards or PayPal too since customers can use credit to pay. Studies show more payment options lead to faster invoice settlement.
5. Offer a Discount for Early Settlement
Though counterintuitive, a settlement discount incentivizes customers to pay faster. Either offer this in your initial reminder or as a last resort if you haven't received payment after follow-ups.
6. Try Other Contact Methods
If email reminders are ignored, try phoning, messaging on social media, etc. Record your contact attempts in case legal action becomes necessary. However, keep matters private to avoid potential legal issues.
7. Write Off the Loss
As a last resort, write off the loss if taking legal action seems too costly and time consuming, especially for smaller invoice amounts. Update processes to prevent repeat issues.
The Bottom Line
Stay calm and professional when following up on late payments. Use these tips to get invoices paid punctually. Automating with an order fulfillment service like Simpl can help streamline operations so you can focus on accounts receivable.
FAQs
What is the best first step when an invoice is overdue?
Send a polite, friendly reminder highlighting the outstanding amount. Avoid aggressive language, especially if it's only been a short time since the due date.
If a reminder doesn't work, what should you try next?
Email a statement of account clearly showing the overdue balance. Use an attention-grabbing subject line and keep it in a separate thread from previous correspondence.
Can offering a payment plan help get an invoice paid?
Yes, if a customer is struggling, suggesting smaller installments over time with a small late fee can incentivize them to pay what they can. Partial payments are better than no payments.
How do additional payment options encourage invoice settlement?
More options like credit card or PayPal allow customers to leverage credit to pay. Studies show the more payment methods available, the faster people pay outstanding balances.
Why offer a discount to customers with late invoices?
A settlement discount gives customers an incentive to pay faster, even if it means slightly less revenue for you. The discount can prompt payment where reminders failed.
If email reminders don't work, what should you try?
Phone calls, social media messages, etc. persistently yet professionally communicate that you want to resolve the late payment. Record contact attempts in case you need to take legal action.
When is writing off an invoice as a loss appropriate?
Only as a last resort if other attempts fail and legal action seems too costly for the amount owed. Then update processes to prevent repeat issues.
