Having lots of unpaid invoices can really hurt business cash flow and threaten its chances of survival. Whether you work in construction, trucking, manufacturing, staffing, medical, hospitality or any other industry, here are a few invoice management tips to help ensure you receive payment and maintain a stable business cash flow.
1. Check on your open receivables often
By knowing how many open receivables you currently have, and checking in more often, you ensure that nothing slips through the cracks. Being aware of your business’s outstanding payments on a daily basis means you won’t let your customers get away with not paying their bills for a longer period than if you’d only check in on your accounts receivables once a month.
2. Remind your customers about their outstanding bills
Be polite but firm when reminding your customers about unpaid bills. If you see a customer’s due date is coming up, send them a reminder since it’s easy to misplace or set aside a bill and forget to take care of it. Reminding your customer about the due date makes it more likely they will pay on time and shows you are on top of your invoices.
3. Follow up on the oldest unpaid invoices first
The older an invoice is, the harder it is to collect so going after older unpaid bills first is best. Organize your outstanding invoices by order of oldest to newest invoice and work down the list, tackling the newest unpaid invoices last. By doing this, you guarantee that no invoice ever gets to a point where receiving what’s owed to you is pretty much impossible.
4. Be specific about when payment is due
By giving your customers a specific date within which the bill is due, you are giving them a timeframe and deadline, and they will probably respond better to it and pay the bill within the allotted time. Telling them their payment is due within 30 days gives them a firm time period within which they need to pay their bill and doesn’t allow for any dithering.
5. Charge an interest fee
This gives customers a reason to pay their bills on time as they want to avoid paying more on top of their outstanding payment. Be sure to inform customers about late fees up front and remind them in the invoice about these fees accruing if payment is late.
6. Provide incentives
Besides charging a late fee to encourage customers to pay on time, a positive incentive for customers who pay early may also be a good idea. You could offer a small percentage discount if a customer pays within an “early” timeframe, or offer future discounts, credit or gift certificates so a customer will want to pay their bills early and appreciate the reward your business extends.
Managing outstanding invoices is just another part of business. Just remember that factoring companies are available when your business cash flow starts to get a bit rocky. Factoring companies will purchase your unpaid invoices and give you the cash you need to run a successful business.
