Outstanding invoices can have a serious impact on your cash flow. The smaller the business you’re running, the higher the impact you can expect. If you don’t have all the financial means readily available at all times, how are you going to pay the bills or take advantage of profitable business opportunities as they present themselves? As it turns out, there’s a whole lot you can do, starting with the following 5 strategies:
1. A polite reminder goes a long way
One of the biggest mistakes you can make at this point is to immediately resort to verbal aggression and threats. First, make sure that the invoice was sent to the right person, that the payment terms were clear, etc. Surely, you wouldn’t want to risk finding out that the fault was yours all along, would you? Also, the client may have a legitimate reason for the payment delay and could very well be dealing with an emergency that requires a full-time commitment. Therefore, just send a polite reminder to begin with and take it from there.
2. Early-payment discounts or late-payment charges
Some would argue that early-payment discounts are just a polite way of framing late-payment charges, but no matter how you want to present it, it’s an effective strategy of dealing with those who don’t pay their dues on time. By discouraging them from even trying to be late in the first place, you should be able to significantly lower the percentage of late paying clients.
3. Express your feelings in a follow-up message
After writing a polite reminder and not receiving a reply or your payment, a good way to follow it up is to express your disappointment through writing. If you’ve always been there for the client whenever they needed something, mention it and use it as a basis for your argument to point out the one-sidedness of your business relationship. Although it’s crucial to clearly express your disappointment at this stage, don’t threaten anything yet.
4. Invoice financing
If you just can’t seem to get it settled any other way, a good way of dealing with outstanding invoices is through invoice financing. That way, you might only get a percentage of what you’re owed, but the upside of doing this is getting access to your money practically in an instant, which allows you to make further investments and pay your own dues.
5. Fire the legal cannons
After you’ve exhausted all the other options available to you, it’s time to step it up a notch and go after the client through legal means. However, it’s important to realize this is a last resort option, as you’ll effectively destroy the good business relationship you’ve established with them, so use it sparingly and always try all the other alternatives first. Of course, you should gather all the necessary evidence and hire a good attorney if you want to maximize your chances of success.
Outstanding invoices can be a real nuisance, but with the right mindset and strategy, they can be effectively dealt with in one way or another. As a general rule of thumb, start lightly and be polite even though your anger may start clouding your better judgment. By staying assertive and polite at the same time, you’ll get your message across clearly and efficiently, without overstepping the boundaries of professionalism.