Nov 15, 2023
If you're reading this, you're probably all too familiar with the stress and frustration of chasing invoices. We get it. You provided a service or product, and you expect timely payment of your company’s invoices. But sometimes, despite your best efforts, you find yourself dealing with an invoice past due or even multiple outstanding invoices. When chasing late payments becomes a hassle, it's time to rethink your approach.
This guide is built for businesses like yours that are struggling to get paid. Here, we'll explore proven strategies for managing those pesky past-due invoices and securing the overdue invoice payments slowing down your business cash flow. With a bit of help from Resolve, you'll be well-equipped to tackle the issue head-on and ensure that the phrase "how to collect past due invoices" can stay out of your internet search bar.
Past-Due Invoice: Meaning and Impact
A past-due invoice is exactly what it sounds like: an invoice that has not been paid by its specified due date. While this might seem straightforward, the impact of having these unpaid invoices lingering in your financial books can be significant. Unpaid or past-due invoices directly affect your cash flow, making it challenging to meet operational costs, pay salaries, and invest in business growth.
The domino effect of one overdue invoice leading to a financial shortfall can be concerning, especially for businesses operating on thin margins. A single unpaid bill can turn into multiple outstanding invoices, creating a cycle that's hard to break. This feedback loop ultimately means that you'll spend more time and resources chasing late payments and less on what matters most—growing your business. So, understanding the potential severity of missed invoice payments and how to handle them is the first step in tackling the problem and turning those past-due invoices into paid ones.
12 Easy Strategies to Chasing Invoices
If you're finding it tough to get your clients to pay their invoices on time, you're not alone. Fortunately, there are actionable steps you can take to get your invoices paid without having to lose clients or face legal complexities. In the upcoming sections, we’ll guide you through 11 straightforward steps to streamline the process of chasing invoices and improving your cash flow. This guide is aimed to assist you in minimizing the hassle of chasing late payments and getting your business back on track. So, let's dive in and help you recover what you're rightfully owed.
1) Clear payment terms agreement
One of the most proactive steps to avoid chasing late payments is to set clear payment terms right from the start. When you establish explicit terms, you remove any ambiguities that could result in an outstanding invoice. Specify due dates, penalties for late payments, and acceptable payment methods in a formal agreement. By doing so, you make the payment of an invoice a transparent process for both parties, reducing the chances of future disputes.
2) Encourage advanced payments
Requiring a partial payment upfront can secure some of your revenue before delivering a service or product. This not only promotes commitment from the client but also cushions your cash flow. This practice can be beneficial for high-value projects or new clients whose payment habits still need to be discovered. You can also offer a small discount to reward clients who pay their invoices early or on time.
3) Remind them before the invoice is due
A friendly payment reminder 1 to 2 weeks before the invoice is due can be quite effective. This is a non-confrontational way to remind your clients about upcoming due dates, minimizing the chances of overdue invoices. You can automate these reminders using invoicing software, making the process more efficient.
4) Send a past-due invoice reminder
If the first reminder didn’t result in payment, it’s time to send a past-due invoice reminder. Stress the urgency without being confrontational, outlining any late fees or other penalties included in your initial agreement. After the payment date has passed, this step is crucial for chasing invoices that have become past due invoices.
5) Offer different payment options
Flexibility can make all the difference in receiving timely payments. By offering multiple payment methods such as credit cards, wire transfers, and ACH, you increase the convenience for your clients. This approach can significantly reduce instances of invoices past due, as it eliminates payment-process-related excuses.
Read an Example: How Tern Bicycles Increased Sales Orders with Better B2B Payment Workflows
6) Use an invoicing software
When chasing invoices, automated systems like Resolve can make a world of difference. Resolve can benefit different types of businesses and is even listed among the "Best debt collection software for small businesses." The process is simple: Resolve can handle quiet credit checks, you can offer net terms to your client thanks to Resolve’s advance payment, and the company also automates accounts receivables by reminding your client about the upcoming invoice.
With features like automated reminders and tracking, you can save time and effort that might be spent on manually chasing late payments.
7) Send a letter for past due invoices (email)
If previous methods don't work, it’s advisable to escalate the matter by sending an email to remind clients of their outstanding invoices. To make it easier, below are some templates you can use.
Past due invoice template letter (email)
Subject: Subject: Notice of Overdue Payment for Invoice #[Invoice Number]
Dear [Client’s Name],
I trust this message reaches you in good order.
This correspondence serves as a formal notification that payment for Invoice #[Invoice Number], which was due on [Due Date], remains outstanding. As of [Current Date], the account has not been settled and is now [Number of Days Late] days in arrears1.
We would like to remind you of the importance of adhering to the agreed payment terms to ensure the continuity of our business operations and service provision.
Please find the pertinent details of the invoice below for your convenience:
- Invoice Number:
- Date Issued:
- Due Date:
- Outstanding Amount: [Amount Due]
We urge you to process this payment promptly. If, however, you have already completed the payment, we kindly ask you to provide us with the transaction details so we may update our records accordingly.
Should there be any discrepancies or queries regarding this payment, please contact us immediately to discuss and resolve any outstanding issues.
Payment can be remitted through the following methods:
- [Payment Method 1]
- [Payment Method 2]
- [Payment Method 3]
Your attention to this matter is imperative and highly appreciated. We are committed to providing you with the highest level of service and look forward to resolving this matter quickly.
Yours sincerely,
[Your Name]
[Your Position]
[Your Company Name]
[Your Contact Information]
Friendly overdue invoice letter, email template
If you currently have a good relationship with the client and would like to send them a friendly overdue email, you can also opt for a more casual and closer tone. Sometimes clients might have forgotten about the invoice or can be genuinely struggling, a pleasant reminder can be just the thing that sets the wheels in motion.
Subject: Friendly Reminder - Invoice #[Invoice Number] is Overdue
Dear [Client’s Name],
I hope this message finds you well.
We wish to bring to your attention that payment for Invoice #[Invoice Number], which was due on [Due Date], has not yet been received. As of today, [Current Date], the payment is [Number of Days Late] days overdue.
We understand that oversights happen and there may be valid reasons for this delay. However, as our valued client, we rely on the timely settlement of invoices to maintain our service levels and operational efficiency.
To assist us in reconciling our accounts, we kindly request that the outstanding amount of [Amount Due] be settled at your earliest convenience. If you have already made this payment, please disregard this notice and accept our thanks.
For your reference, here are the details of the invoice in question:
Invoice Number:
Date Issued:
Due Date:
Amount Due:
If there are any issues or concerns regarding this payment, or if you require further details, please do not hesitate to contact us. We are more than willing to discuss any matter that may have led to this delay.
Please make the payment using the following methods:
-
[Payment Method 1]
-
[Payment Method 2]
-
[Payment Method 3]
Your prompt resolution of this payment will be greatly appreciated. We value your business and look forward to continuing our partnership.
Thank you for your immediate attention to this matter.
Warm regards,
[Your Name]
[Your Position]
[Your Company Name]
[Your Contact Information]
Strong letter for outstanding payment, email template
However, a nice email for past-due invoices might not work for every client, especially if the issue is persistent. In such cases, a stronger email might be necessary. If you are currently in this situation, we have created two different past-due invoices email templates for this situation, each one with a stronger tone than the last:
1) Subject: Urgent: Outstanding Payment Required for Invoice #[Invoice Number]
Dear [Client’s Name],
I am writing to you concerning Invoice #[Invoice Number], which was due for payment on [Due Date]. As of today, [Current Date], we have not received the outstanding payment of [Amount Due], which is now [Number of Days Late] days late.
We understand that unforeseen circumstances can arise, but it is imperative that we receive payment promptly to maintain a healthy business relationship and to avoid any disruptions in the services we provide.
Please be aware that, as per our agreed terms, a late payment fee of [Late Fee Amount] has now been applied to the total amount due. To prevent any additional charges and potential further action, we kindly request that you settle the outstanding balance immediately.
We value your business and would like to resolve this matter swiftly. If there are any issues preventing payment, please contact us at your earliest convenience so we can discuss a suitable solution.
To make a payment, you may use the following methods:
- [Payment Method 1]
- [Payment Method 2]
- [Payment Method 3]
Please reference your payment with Invoice #[Invoice Number] to ensure it is processed correctly.
If we do not receive payment or hear from you regarding this matter by [Final Deadline], we will have no choice but to escalate this issue to our collections team.
We hope to resolve this amicably and continue our business partnership without further complications. Your immediate attention to this matter is highly appreciated.
Sincerely,
[Your Name]
[Your Position]
[Your Company Name]
[Your Contact Information]
2) Subject: Immediate Settlement Required: Invoice #[Invoice Number] Overdue
Dear [Client’s Name],
This letter serves as a formal notice regarding Invoice #[Invoice Number], which was due on [Due Date]. As of [Current Date], we have not received the payment of [Amount Due], which is now [Number of Days Late] days overdue.
Our records indicate that this is not the first instance of delayed payment. Such recurrent tardiness in settling invoices is unacceptable and disrupts our financial planning and business operations.
Please be advised that a late fee of [Late Fee Amount] has been applied to the total overdue amount, as stipulated in our terms and conditions. The total amount now due, including the late fee, is [Total Amount Due].
We demand immediate payment of the overdue amount to avoid further action. Failure to comply with this request will leave us no alternative but to initiate formal proceedings to recover the debt. This may include reporting the delinquency to credit agencies and engaging a collections agency, which could have a detrimental effect on your creditworthiness.
To resolve this matter without further delay, we require the full payment to be made by [Final Deadline]. Payment can be made via the following methods:
- [Payment Method 1]
- [Payment Method 2]
- [Payment Method 3]
Please ensure that the payment is referenced with Invoice #[Invoice Number] to avoid any processing delays.
We urge you to treat this matter with the seriousness it deserves and settle your account promptly. We prefer to resolve this amicably; however, we are prepared to take all necessary steps to recover the amount owed.
Your immediate attention to this matter is required.
Sincerely,
[Your Name]
[Your Position]
[Your Company Name]
[Your Contact Information]
8) Charging late fees
Implementing a late payment fee structure in your invoices can serve as a deterrent against late payments. Clearly mention the late fees in your payment terms agreement to make sure clients are aware they'll incur extra charges for delayed payment of invoices.
9) Call them
Don't underestimate the power of a phone call. It can help settle misunderstandings and prompt immediate action for outstanding invoices. Take the call as an opportunity to assess if the client is facing genuine issues, as at times you might need to be flexible in chasing late payments.
10) Follow-up email regarding payment
For clients facing financial difficulties, offering a structured payment plan is a viable option. Net terms can be offered from the start as a way to get ahead of this situation, and Resolve can help you offer this financial help.
If the initial term agreement was not met by the client, by working with Resolve you can also offer to extend the time the client has to pay off their outstanding invoice. For example, if the initial agreement detailed a net 30 arrangement to the client but the invoice has not been paid, both parties can agree to extend those terms for up to 60 days, thereby providing some extra time for the client to settle the situation.
Proposing net terms on an invoice can not only help clients navigate through financial strains but also foster a more sustainable client relationship for future transactions.
11) How to send an unpaid invoice to collections?
When you've exhausted all other avenues for retrieving invoice payment, sending the unpaid invoice to collections becomes a last resort but sometimes a necessary step. To do so, you would typically work with a debt collection agency. They take over the responsibility of chasing late payments, allowing you to focus on your core business operations. Ensure you have sufficient documentation to prove the debt before proceeding.
12) How to take legal action for non-payment of invoices
As a last resort, you have the option to take legal action. While we are not legal experts, know that this route often involves significant time and cost, and should only be considered for substantial outstanding invoices that seriously impact your business. Before taking this step, consult an attorney for legal advice to assess the viability and potential outcomes of your case.
Final thoughts on how to reduce overdue in a business
Trust us, we get it. Chasing invoices is the last thing you want to be doing. The energy spent tracking down payments could be better used to grow your business. The ultimate way to minimize the stress of overdue invoice issues is by nailing it right from the get-go. And this is where Resolve can make a world of difference for your business.
Resolve offers a streamlined invoicing and payment tracking solution that comes with several different benefits for companies:
- Resolve eliminates the need to chase invoices. Businesses can get a cash advance of up to 90% on approved net terms invoices, ensuring they have the funds they need without waiting.
- With Resolve, the invoicing and payment process is automated, reducing administrative tasks and ensuring timely payments.
- Companies can also get access to Resolve’s quiet credit checks, which can help you avoid working with clients who will need to be chased down for payments in the future.
Resolve can be more than just software – we’re your partner in ensuring smooth, hassle-free business transactions. Isn't it time you focus more on what you love about your business rather than worrying about outstanding invoices?
Take the first step towards a more efficient accounts receivable process. Try Resolve today and transform the way you handle your B2B payments.
1: Money that is owed and should have been paid earlier.
