How to Collect on Unpaid Invoices
Although unpaid invoices can create cash flow problems in businesses, many companies are reluctant to initiate the task of collection. You can make the laborious process of collecting less onerous if you regularly implement these simple but effective practices.
Prefer Clients With Good Credit
The best way to predict whether your potential clients will pay on time is to purchase the credit reports of clients that you are contemplating dealing with and research their payment history. If they have paid promptly in the past, they will likely pay you on time as well, and you can afford to offer them 30-day payment terms. For clients with dubious credit histories, insist on advance payments or payments on delivery.
Document Client Transactions
Have an attorney draw up contracts for every sale you make, particularly if payment terms are involved. When you complete work or deliver products, always have clients sign an acceptance letter that states that the labor has been performed or the goods have been received to the satisfaction of the clients. If something goes wrong, you need these documents in order to take legal action. Promptly send the clients their invoices, a copy of the acceptance letter, and any other relevant paperwork.
Communicate With Clients
Once you send off the documents, maintain a line of communication with your clients. Check to be sure the invoices arrive safely. If clients have not paid by five days after the due date, contact them to find out if there are any problems and confirm a new date of payment. After repeating this procedure several times, you may conclude that you have a collection problem. Despite your misgivings, always maintain your professionalism. You may be able to resolve the dispute amicably, or you may be forced to call in a professional collection agency.
Even if your clients pay on time, allowing 30- to 60-day payment terms may cause problems with cash flow. To resolve these, consider financing by invoice factoring, asset-based loans, or inventory financing. For more advice on business financing, contact Growth Lending Group.