Handling Unpaid Invoices: 3 Practical Things You Should Do

It can be frustrating for a business owner to have problematic customers. Unpaid payments leave a negative mark on your sales margins and directly affect your financial planning for the next quarter. The etiquette when dealing with unpaid invoices is a tricky one since you don’t want to sound aggressive, but you also need to remain civil. This is why you need to perform a professional yet assertive course of action.


Dealing with late-paying customers


It’s a common practice to chase overdue invoices, especially if you already accomplished your services for your customer. However, some startups are still reluctant to ask for the money that they deserve. The threat of losing a potential customer compels businesses to extend their patience. Nevertheless, there are limits you should set to your professional considerations.


If you don't know how you should follow up on an invoice, here are three practical things you can do:


1. Engage in a payment request correspondence


The most civil way to reconnect with your non-paying customer is to send a payment request letter. You can send it either by post or email correspondence. Be polite in your message, and remember to include the necessary information about the transaction. List down the invoice number, when it was due and request for a specific date on when you can expect the payment.


If your customer has more than one missed payment, it’s best to collate these invoices into an organised statement. This should include all the unpaid invoices with the corresponding missed due dates. It’s an effective way to help your customer know the exact figure they owe.


2. Follow-up your correspondence through the phone


If a letter won’t suffice, a phone call is your next course of action. Although you may feel uncomfortable doing it at first, you should remember that you’re in the right to ask for what is due. You can let your sales rep handle the call, but you should remember to give them guidelines on what to say.


If your customer disputes the aspects of your invoice, remember to have a copy of it on hand so that you can refute any inconsistencies that they may report. Additionally, you should take notes during your phone call so that you can follow up on their promises and agreements over the line. This will help you know when it’s time to get back on their response.


3. Issue late payment fees


If you’re dealing with a recurring problematic customer, you shouldn’t be reluctant to charge them with late fees. As a supplier of service, you have grounds to charge a late payment fee if your customer continues to avoid paying their dues. You can start by writing a warning letter to reiterate the urgency of the matter. If they ignore it, you can continue to take more drastic measures. You must have a clause in your service agreement that you can refer to when adding these penalties.


Conclusion


You should do everything you can to receive compensation for your services. However, if your customers attempt to ignore you completely, you should still write it off as a bad debt in your books. This will help your financials remain accurate and serve as a reminder about being cautious about who you work with. Use this experience to implement stricter invoicing protocols to avoid unnecessary losses in the future.


As a growing business, it’s necessary to maintain a proper record of your financials to ensure that you’re tracking your company’s growth. We can provide you with eCommerce specialists, such as Amazon and Shopify accountants in Australia to optimise your bookkeeping practices. Book a free strategy session with us today to learn more about how we can improve your enterprise!

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