For small business owners or self-employed individuals, cash flow is everything. You rely on timely payments to cover overheads, settle outstanding bills and even pay your staff or contractors. So when your clients don’t pay their invoices on time it can seriously impact your cash flow and ability to take on new projects. Scott Mclay from Sage explains how to chase late invoices as well as sharing a handy flowchart you can download and keep for free. The flowchart is an excellent infographic that takes you through the timeline of chasing late invoices and your options for debt recovery in the event that your client still fails to pay you.
According to research carried out by Sage a small business, on average, spends 71 days per year on admin including following-up on delayed payments. That’s 71 days that you could better spend growing your business and dealing with important financial matters, not chasing your clients months after projects have completed.
When chasing late invoices, it’s important to use a set of widely accepted business protocols. These protocols ensures that you always remain professional and protect valuable client relationships, give you and your client a fair amount of time to deal with the late payment issue before escalation to third party options.
How To Chase Late Invoices
The first step with invoicing is to make sure you always send out your invoices promptly and in accordance with terms agreed with your client. If invoices in your business consistently go out late or have errors on them then you should consider making changes to your invoicing methods. After all if you miss out crucial information on your invoice you are giving your client an excuse to take even longer to pay you!
The flowchart from Sage perfectly summaries what you need to do and when you chase an overdue invoice. I recommend you download and keep a copy of this flowchart handy so you can incorporate it as part of your invoicing and late invoice chasing process (download available at the end of this article).
Top Tips When You Chase Late Invoices
Chasing late invoices can be really frustrating and time consuming. To help here are my top tips for chasing late invoices:
- Always make sure you have issued your customer with the invoice that includes all the correct details and is in accordance with any agreements made;
- Make sure that any emails or phone calls you make are with the right person and you keep a note of dates and times that you communicated with your customer;
- Always be polite but keep to the facts;
- Persevere and stick to the Sage Flowchart, using diary reminders to help you stick to the timeline;
- Remember your rights under government legislation to charge interest on any outstanding invoices;
- Review your trade debtors listing regularly so you catch invoices as soon as they go overdue;
- Only approach a debt collection agency as a last resort, not only will they take a percentage of your invoice but it will damage your client relationship irreparably;
- Always chase for late payments before engaging with your client for further work;
- Remember on many occasions late payment can simply be the result of an oversight, so don’t take it personally!