Convert Your Invoices Into Cash By Following These Tips.
You’ve worked hard to sell your products and perform your services for your customers. You send an invoice…and then hear crickets. The most important part of your job is not done yet – collecting on your invoices!
Having a lot of unpaid invoices can spell certain death for your business. Cash is king, and unpaid invoices can’t help you meet your payroll or pay your rent.
Collecting on past due invoices can be a tricky part of your job. But as the owner of your business, the responsibility lies squarely on you. So here are some tricks to help ensure you are getting paid on time and with a minimal amount of fuss.
Use an auto-payment system. Don’t wait for your customers to send you a check. When they sign a contract with you, have them also sign an authorization for you to charge their bank or credit card account once the job is done. This completely avoids the existence of receivables, and is definitely my favorite tactic.
Send periodic reminders. I would guess that about 90% of invoices go unpaid because the customer simply forgot to pay it! Life happens…and people forget to pay their bills. So give them a gentle reminder every so often – I would say about every 20 days or so. This will usually prompt a sincere apology on their behalf, followed quickly by a check in the mail.
Offer a payment plan. Sometimes our customers hit a cash crunch, and they can’t pay their bills (usually because their customers, in turn, aren’t paying theirs; it’s a vicious cycle). Rather than demanding 100% of the payment up-front, offer them an option to pay it down in installments over the next few months. It will make it easier for them to pay you…and you will get paid in full.
Use an attorney. If you have tried contacting and reminding your customer for several months, and still have not heard anything, then it’s time to use a heavy hand. Have your attorney send them a demand letter. The bottom line is that they owe you money, and it’s not okay for them to simply not pay or not respond. Your attorney will either receive a response (and a payment), or will escalate this to a lawsuit. Either way, you will get paid.
(Note: make sure all your contracts have a clause that allows you to recover attorney fees and court filing fees, to ensure that you are not paying for this yourself)
Collecting on past due receivables is always the most challenging and emotionally charged aspect of running your business. But it must be done if your business is to survive. The good news is that you don’t have to do this yourself. Managerial accountants, like us, are experts in helping you collect your cash. So if you need help in turning your past due invoices into cash, then schedule a free consultation with us and let’s chat.