How to Collect Unpaid Invoices
Although unpaid invoices create cash flow problems, many businesses are reluctant to make collection a priority. However, if you don’t get paid, you can’t pay your own expenses, and your business collapses. Here are some tips to ensure that your clients honor their invoices on time and your cash flow remains consistent and healthy.
Screen Your Clients
Protect your company from customers with poor payment histories by purchasing and examining the credit reports of potential clients before you offer them terms. You may need to pay a little for the information, but it can provide significant savings in the long run by helping you avoid unpleasant exchanges, unpaid invoices, and a diminished cash flow.
Put Transactions on Paper
For every client transaction, have your attorney draw up a contract that includes goods or services delivered, agreed-upon remuneration, the timeline for payments, and the procedure for handling disputes. This precludes any uncertainty later with unpaid invoices. When you have fully delivered your goods or services, have your client sign a letter of acceptance. Documenting all transactions makes any necessary legal resolutions of disagreements much easier.
Keep in Touch With Clients
Immediately send copies of the invoice and signed acceptance letter to the appropriate personnel in your client’s company. When payments are no more than five days overdue, contact your client by email or phone with a reminder and fix a new payment date. Even if your client’s late payment affects your cash flow, behave in a professional manner and attempt to resolve any dispute amicably. If straightforward communications and persuasion do not cause your client to pay, consider hiring an attorney or a collection agency to deal with your client so you can get back to focusing on your business.
Even if your clients are honest and pay on time, long payment terms of 30 to 60 days can negatively impact your cash flow. Possible solutions if your clients are creditworthy include asset based financing such as invoice factoring and asset based lending. For more advice on business financing, get in touch with Muth Capital at 914-999-2855.