An invoice is a financial document that is generated by the vendor after the completion of the project. It is then immediately sent to the client for payment clearance. An invoice mentions the product or service details, payment obligations, payment method as well as due date. An invoice states all the vital information about a business transaction and can be used for future reference.
But when an invoice is not paid by the customer within the due date it is known as an outstanding invoice. It’s hard to deal with such situations when your invoices remain unpaid even after your work is done. Here in this article, we will discuss the strategies that would help you deal with an outstanding invoice. Scroll down!
Outstanding Invoice: Strategies to deal with it
Unpaid invoices cause severe inconvenience for the existence of the business. It also interrupts the cash flow that puts all your business payments on hold. Starting from payroll, supplier payments to overhead expenses, entire systems get disturbed if your invoices remain unpaid. Hence, it is a very big deal for a company as well as for a small business owner. Check out the strategies to deal with it!
Send a request letter or email
You take the first move and send a request letter or email asking about the payment. Mention the invoice number and due date and keep the tone polite. Your invoice number will refer to the unpaid invoice hence you don’t need to mention any other details. Keep the note short and simple and ask about when you can expect the invoice clearance.
Make a phone call
Chasing for late payment is a tedious task. Calling the late payers tends to have better results as they cannot avoid the call. Politely remind them about the overdue and ask when you can expect the payment. Don’t get off the call until you have clarity as to when they are going to settle the payment.
Send overdue invoice
Sending an overdue invoice with an “overdue” stamp on it gives an effective visual. You can even attach the original invoice with the request mail and send it again. This way you can remind your clients about the outstanding amount that needs to be cleared immediately.
Implement late fee
Chasing your late payers may seem daunting, hence implement a late fee policy in your contract to encourage your customers for timely payments. Clearly state the late fee policy at the beginning of the sale and have your customers sign in the agreement. This way you can legally bind them and they cannot ignore paying the late fee if they miss the due date of payment. You can even remind them before they miss out on the date so that they can waive off late payment by clearing the payment right away.
Send account statements
If a customer has a few outstanding invoices, then generate a systematic account statement with any online accounting tool and send them directly to the customer. You can make a phone call and discuss the outstanding amount and expected payment date.
Stop supplying goods
Stop supplying your products or services until the invoice is paid. To protect your business from being unsustainable, stop fulfilling the orders of the customers who are late with their payments. This may seem aggressive but this may seem effective and would ease up your job when it’s time to get the payments.
Hire debt collector
Debt collectors are professionals with specific skill sets for collecting overdue invoices. But this method may seem expensive, as these debt collectors charge around 25% or more of the money they collect.
Take the help of a lawyer
If any of the above methods do not work and even debt collectors fail to process the overdue invoice, involve a lawyer. A specialist lawyer can deal with such situations if things get complex. Even debt collectors have contact with some in-house lawyers who can help you on this matter.
Does outstanding mean overdue?
Outstanding invoices are those invoices that the vendor or the company has yet to pay. The accounting department tracks all the payable invoices, reviews them, seeks management’s approval, and records them. Outstanding invoices are also tracked and scheduled for payment.
Now, past the due date when the invoices are still yet to be paid, then these invoices become overdue invoices. These invoices are recorded in the company’s or vendor’s account payable report and involve a late fee as per the policy designed by the organization or business enterprise.
The outstanding unpaid balance of the current amount due is known as outstanding payment. It could be a payment that is done but not marked paid for some reason. Even it could be the interest-bearing outstanding balance taken on credit against a loan, product, or service.
Unpaid invoices are those invoices that are to be paid by the customers and are also known as outstanding invoices.
The invoice due date is a specific date set by the company or the vendor as the due date for making the payment at the latest.
This article shares every detail related to the outstanding invoice and discusses the strategies that can make the payment process faster. Follow them to normalize the cash flow and keep the business running smoothly.