How To Make Sure Your Invoices Get Paid

How To Make Sure Your Invoices Get Paid

Australian businesses are folding under the weight of unpaid invoices, with a report showing they are owed $26 billion by their customers.

It’s the one thing you really wish you didn’t have to worry about. You’ve completed the job and sent your invoice out but you are stuck waiting on payment from your clients. When you are left with outstanding invoices it can impact your cash flow and potentially impact your ability to start other jobs or even pay bills and wages.

So how do you make sure you get your invoices paid promptly?

Our business advisors have put together these handy tips to help make sure you get your invoices paid easily and quickly, so you’re free to move onto your next project without hassle.

Get Organised And Get Paid

Australian business owners are spending an average of 12 days a year chasing unpaid invoices, yet less than a third implement online accounting systems which would speed up payments and improve cash flow.

If you’re not organised and can’t keep up with what invoices need to be sent, let alone followed up on, it’s hardly surprising that you might have numerous outstanding invoices waiting for payment from clients.

To prevent this from happening make sure you have a solid system in place to invoice your clients as soon as the job is completed and set regular reminders. Accounting software XERO is great for helping make this a pain free process. You can create invoices even while your away from the office using your phone and you can even set automatic reminders to be sent after invoice go so many days without payment.  

Check out: 10 Reasons To Choose Cloud Accounting Software For Your Small Business

Make Sure You Know What Is Going On With Your Books

77% of Australian business owners are impacted by late payments

This is similar to above but worth mentioning. Set aside a day once a week to catch up on your books. Try and make it the same time and day every week so you get into a routine and are less likely to put it off or forget to do it.

When you are doing your books take a look at what invoices need to be sent for this week’s work, what invoices have been paid and require receipting and finally what invoices are outstanding along with how overdue they are. By doing all of this you can then know exactly where your finances are and if you need to follow up on any of your invoices with clients directly.

Check out: Top 6 Bookkeeping Frustrations For Small Business Owners

Send A Friendly Reminder

It’s not uncommon that an invoice hasn’t been paid because your client has misplaced the invoice or thought they had already paid the account. If your bookkeeping system allows it set up an automatic reminder for the day after your invoice’s due date to send an email your client.

Make sure the email is friendly and is just to touch base to remind them the account is due and you haven’t received payment yet. Usually this will be sufficient in jogging a client’s memory and you will likely receive payment shortly following. If you get in touch with your client try setting a revised due date as a sign of good will.

Download our free template to get your invoices paid faster: Friendly Reminder Email Template

A Personal Touch Goes A Long Way To Getting Invoices Paid

If you operate a small business and have a good working relationship with your clients it will be less likely that you will have an account go unpaid. So one technique that is good business practice to implement is to keep in touch with your clients.

Don’t just rely on your emails or letters, give them a call. Let them know that you’re just checking in to see if they had received the invoice, if there was any reasons the account had not yet been paid and when you should expect payment. Make it as friendly as possible and you will increase your likelihood of receiving payment.

Don’t Be Afraid To Send An Overdue Notice

Now we are getting into the territory that everyone hates. You sent your invoice on time, you even sent a friendly reminder notice but alas, you still haven’t received payment.

Maybe your client is just waiting for their cash flow to free up?

Maybe they made the payment but it just hasn’t transferred from their bank to yours yet?

At this point if you haven’t received any response from your client about the invoice don’t assume it will be paid anytime soon.

Set up a business processes of what notices to send and when they should be sent. As a rule of thumb if your invoice is a month or more overdue, you should be sending an overdue notice. Make sure this notice includes the following:

  • The amount overdue
  • The original due date
  • When you expect payment
  • What action you will take if payment is still not made

Download our free template to get your invoices paid faster: Overdue e-mail Template

When To Send A Final Notice Letter

Hopefully if you have a good working relationship with your clients, your books are in order and you’ve followed the previous steps, then you should have very few situations requiring you to send a final notice letter.

However, there will be times when this is necessary.

A final notice letter is also known as a letter of demand. This is only used after already having sent first and second reminder notices and you have still not received payment. You send a letter of demand as a final notice before taking legal action to recover the debt owed on the account.

Remember not to send a letter of demand if you are not willing to take legal action. Weigh up the costs of perusing the debt with a debt collector or other avenues against the actual cost of the account. Sometimes businesses choose to write of bad debts rather than continue to chase them with debt collectors as the cost outweighs the benefits.

If you don’t know what to include in your letter of demand take a look at the sample letter of demand available at www.business.gov.au

Download our free template to get your invoices paid faster: Final Notice e-mail Template

When To Hire A Debt Collector

If you still have not succeeded in receiving payment for outstanding invoices and the amount is substantial enough to not write off then your next step would be to hire a debt collector. You can hire a debt collection agency to collect the outstanding amount on your behalf. If you get to the stage where you need a Debt Collector, then you should check out the Consumer Affairs Website where they compare the Top 10 rated debt collection agencies.

It’s never an enjoyable process to have to follow up on outstanding accounts with clients so by following these tips you can make it easier or avoid the situation entirely. Give our expert business advisors a call today for more tips on how to make sure your invoices get paid.

SMSF Guide | Self-Managed Super Funds | SMSF Advisers Perth

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