Tips for managing overdue accounts
Chasing unpaid invoices doesn't have to be a stressful process. These tips will help you get your overdue accounts under control and prevent them from happening again.
Following up overdue accounts is perhaps one of the least enjoyable tasks in business. After all, who enjoys asking for money repeatedly, the strain it takes on your cash flow and the potential confrontation that comes when someone refuses to pay, even if only for a while?
The following tips will help take the stress out of chasing slow-paying clients.
1. Be polite and understanding
We don’t always know what is happening in the lives and businesses of our customers. They might be delayed due to sickness or a death in the family, have overdue accounts themselves that are reducing their cash flow, they may have forgotten or they could just be having a bad week or month.
"Imagine if you were the one who was late with a payment. How would you want to be followed up? With a forceful, humiliating reminder or a gentle, tactful one?"
Imagine if you were the one who was late with a payment. How would you want to be followed up? With a forceful, humiliating reminder or a gentle, tactful one? A little care in these situations can go a long way, especially when it comes to maintaining a business relationship with the customer in question.
2. Have a separate accounts email
Setting up a different email address for accounts will not only make you seem bigger than you are, it will separate you personally from following up overdue accounts. This is particularly helpful if following up accounts makes you uncomfortable and you still want to appear the “good guy” to your customers.
3. Send regular reminders
When you have overdue accounts it’s important to follow up regularly. It often pays to send a reminder the day the payment is due, then another when it is seven days overdue, then 10 days and so on.
If the payment is over 10 days late, you may want to call and send a letter as well as email to cover all bases. Once payments go beyond 30/60/90 days late (depending on your preference), you may need to take a firmer approach, using a legal letter of demand or hiring a collections agency.
4. Add in a late fee for overdue payments
Adding in a late fee for payments over 14 days late (or another specified time frame) can be a good incentive for customers to pay on time. The late fee amount is up to you, though 10–15 per cent of the bill seems to be quite common, with an increase after every 30 days payments remain late.
5. Reward customers for paying early
Try offering a reward or discount for upfront (non-payment plans) and early payments. The extra saving can often be enough incentive for customers to pay on time.
6. Get payment upfront
If you find you have customers who continually pay late, introduce different payment terms. Consider charging upfront or at least a large deposit so you have immediate compensation for the work you’re doing and maintain your cash flow.
Do you have any tips for getting overdue accounts under control?
For more debt collection strategies, click here.