In this article, let’s be clear first about what we mean by ‘unpaid invoices’. We are not concerned with regular invoicing and credit control, or collecting on-time payments, but solely with invoices that are still unpaid when the deadline for payment arrives. Before this time, there is little you can do to force payment,Read More
In this article, let’s be clear first about what we mean by ‘unpaid invoices’. We are not concerned with regular invoicing and credit control, or collecting on-time payments, but solely with invoices that are still unpaid when the deadline for payment arrives.
Before this time, there is little you can do to force payment, as the customer is well within their rights to pay at any point within the agreed terms – and that is what makes the agreed deadline so important.
When deadline day arrives, it’s worth contacting the customer to check whether they are going to be able to pay in full or not, and remind them that if they do not do so, the invoice will be overdue.
After deadline day, a range of options open up, and it’s up to you to decide the best way to proceed.
For some customers, particularly long-term ‘good payers’, it might be an oversight or a genuine one-off cash flow problem, and you are totally entitled to offer flexibility if so.
You might provide an extended deadline – although you should be clear about when the absolute final date for payment will be, to avoid looking like a soft touch.
Or suggest payment in instalments, or part payment immediately as a sign of good faith, with the rest to follow as soon as possible.
You don’t have to do any of this – and if you don’t feel like being flexible, and just want your money ASAP, then it’s time to get tough.
One option is to stop all work for the client until they pay; those who are long-term recipients of your goods and services may find this alone is enough to make it worth paying in full immediately, just to avoid the disruption to their supply chain.
Be careful though – if you halt work, you may lose out financially on future invoices, so again balance the pros and cons of this method if it applies to a long-term and generally trustworthy client.
For the sake of clarity, reissue the invoice (but do not change the issue date or deadline date) so there is no way the client can argue they are not aware that they owe you the money.
If you have agreed clear terms and conditions upfront – and even potentially if you have not, as these things are also enshrined in law – you can begin to charge statutory interest and fixed penalty fees, so if you intend to do so, again notify your client.
Often the customer will immediately pay the full original amount, but not any penalties you may have already imposed; while technically they should pay the extra as well, this is almost always considered a fairly satisfactory solution to the situation, so be prepared to accept it.
When a big invoice goes severely overdue, that is when you really need to get serious in your debt recovery activities.
A debt collection agency (DCA) can write to the client on your behalf, and a strongly worded letter threatening court action will often do the trick; you could get a solicitor to do the same thing, but they will typically cost more, particularly if any follow-up work such as a telephone call is required.
Finally, if all else fails, you can go to court or register a claim online for some small sums without needing a court date.
These processes are all specific and potentially quite complex, so we won’t go into too much detail in this general overview – a DCA should be able to advise you.
In general though, the approach is the same: give flexibility where it is deserved for previous good behaviour; accept part-payment or payment in instalments if it gets you your money back; and get increasingly ‘serious’ in your handling of larger and longer overdue debts.
Ultimately, anyone who owes you money should be made to pay in full as soon as possible, so don’t be afraid to take whatever action is permissible by law to make sure you get your finances back in full.