3 Ways to Prevent Past-Due Invoices
‘The payment shall be made next week.’
‘The check is in the mail.’
These are statements you likely hear when you are following up on a past-due invoice.
Invoice deadlines are significant for any small business owner. They enable you to plan your cash flow, manage productivity and work towards your revenue/profit goals.
When the customer does not pay when expected, you quickly discover the frustration of following up on a payment that is past due. For the most part, this takes away from focusing on your core business competencies and can lead to anxiety and limit productivity.
These are 3 ways to help you effectively prevent past due invoices.
Have Clear Terms and Conditions
To make a payment on time, your customer needs to know when it is due. This requires clearly stating the terms and conditions of payment. If you are working with a contract from your customers where they outline their terms, ensure that you read and understand these terms carefully.
Consider including discounts and penalties
To encourage customers to pay, consider including a small discount for payment made before the due date. For example, if the invoice is due 30 days after the work is completed, you may offer a 2% discount for any payment made within 10 days of work completion.
In your terms and conditions, you can include a penalty fee for invoices that are not paid on time. This is not to punish the client. Instead, it allows you to cater for any costs you may incur as a result of the late payment.
Put Everything in Writing
There are two main documents that will help you significantly prevent past-due invoices. A well-written contract and a delivery acceptance letter.
Before you begin to meet your deliverables, have an agreement in place that has been drafted by an attorney. This should include deliverables, dispute handling, and expectations for payment and should be signed by both parties.
After the work is complete, get proof from the customer that all deliverables have been met and are accepted. This letter is an indication of job satisfaction and also helps reduce the chances of a dispute. It acts as security if there is a need to take legal action in the future.
When you have due invoices and require support to chart a way forward, seek expert advice from a business advisor. RCN CPAs & Business Advisors can guide you towards appropriate action, and ensure that you never face the same challenge again. Do you need support with a past-due invoice right now? Book a discovery call at www.rcncpas.com today.
