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Home » Published: 12th August 2020 This Article was Written by: Steve - Fed Up Chasing |
Chasing an unpaid invoice is never easy, but every business, large or small has to deal with it from time to time. How do you chase unpaid invoices? When you’ve completed work that the client is happy with, they should then pay for your services within a reasonable time frame. That is how the wheels of business turn.
The problems come when it’s two weeks past your usual 30-day payment term, and you still haven’t received the payment. From here on in, the client is now wasting your time by making you chase a payment that should be sat in your account.
Having a healthy cash flow is central to your business’s survival and success, so it’s essential you know how to tackle late payers when this frustrating problem arises. Here are some simple strategies you can employ to get payments in on time while maintaining good relationships with your clients.
As you become more experienced in business, you come to understand that chasing invoices is all part of the course. In the early days, it can feel rude to contact a client to ask for payment. It’s not. You’ve done the work, and the client is happy, so you’re entitled to be paid on time. By not abiding by the payment terms, it’s the client who is being rude.
No one likes to talk about money, but setting the client’s expectations by discussing your payment terms early on can prevent problems further down the line.
Explain when you will invoice the client and what the payment terms will be. Most small companies tend to opt for a 30-day payment term, while larger companies might be happy with 60.
Some companies also ask for a proportion of the cost to be paid upfront.
Government legislation has been introduced that allows small businesses to charge up to 8 percent interest plus the Bank of England base rate on late payments. They can also pass any debt recovery costs onto the client.
If you haven’t already agreed when the money will be paid, the law says the payment becomes late 30 days after either:
If you’re not sure what level of interest to charge, you can set your terms as long as they’re within the government’s guidelines. Some people choose to charge 2 percent interest on payments made after 30 days, rising to 3 percent after 60 days.
However, you should warn your clients from the off that interest will be charged if your invoices are not paid on time.
When a payment is not made on time, the temptation is to think the worst and assume the client is trying to get away without paying. This is rarely the case. In most instances, the client will have simply forgotten to pay or have a prescheduled date when their payments are made.
Instead, we advise you to wait a couple of days after the payment was due before sending a polite reminder.
Your initial payment reminder should be polite and written in the right way. Simply stating that the payment is now overdue is often enough to prompt payment. Something as simple as the following is fine:
Hi, David
Just to let you know that invoice 155 is now due for payment. I’d appreciate if you could settle at your earliest opportunity. I’ve re-attached the invoice for your reference.
Many thanks,
Steve
If no payment is forthcoming and you do not receive a response from the client asking for an extension, you should then send another email. This time, explain that the invoice is now overdue and include a statement of the outstanding cost.
The email should still be friendly and polite in its tone.
At this point, you might also want to think about reprioritising your workload. If you still have outstanding work for the client, you should put it at the bottom of your to-do list. After all, it’s counterproductive to complete more work you might not get paid for.
It’ a lot easier to ignore an email than it is to dismiss a request for payment made over the phone. If you’ve followed the advice above and still haven’t received the money, you need to speak to the client to ask if there’s an issue with the payment.
It may be that the client is experiencing cash flow problems of their own and wants additional time to pay. However, putting the client on the spot in this way should give you a clearer idea of their intentions, and help you decide what course of action to take next.
If the client still doesn’t pay, then you need to continue to chase. Don’t let it consume your life or take too much time out of your working day, but make sure the client knows you are not willing to let it lie.
If payment is promised, ask for the date it will be made by. You should also cease all work for the client until the invoice has been paid.
You may need to consider more drastic action like taking County Court action. A County Court Judgement against a company can adversely affect the credit rating of a company for six years. Often the threat of a CCJ will get the desired response within the processes 28-day period.
Before you do engage a certified debt collector, you may want to consider a Statutory Demand. A Statutory Demand gives 18 days to resolve the issue and if not the debtor must pay in full within a further three days (21 days in total). Once this period is up you can wind the offending company up (compulsory liquidate) to try and get what is owed.
