How To Better Chase Outstanding And Overdue Invoices In 2022?

Cashing Past due and outstanding invoices are causing real problems for businesses, especially SMEs. It is reported that late invoices are about 54% of average business invoices. They would pay in a period ranging from 14-90 days, if not beyond. Here are the best practices that would help you better chase your outstanding invoices and avoid bad debts.

How to better chase outstanding and overdue invoices in 2022

What are outstanding invoices? 

An outstanding invoice is an invoice that the customer has not yet paid but is still within the payment due date. But when the customer passes the payment due date, the invoice becomes a past due or an overdue invoice. So the difference is the timing.

Tips to avoid making your outstanding invoices past due invoices

Before sending any outstanding invoices, you need to send ensure that you have fulfilled all the prerequisites of a valid invoice and applied all the tips for faster-paid invoices. If you did your job, but the client did not pay the invoice. Try to apply the best practices mentioned in this article. These tips would help you reduce the percentage of past-due invoices.

Use Invoicing software

You need to utilize the features provided in the invoicing software. They would make it easier to track, follow up, and remind your entitled employees and clients of the past-due invoices. Use automated emails, reminders, and other features in the invoicing software.

Stop further supplies

If your clients do not pay your invoices, you should stop accumulating more invoices. Stop supplying them until they pay their invoices. This would urge them to pay faster, in one way, and save your inventory for better clients.

Send early reminders of outstanding invoices

You need to track your outstanding invoices and send regular and early reminders. You could chase your invoices in different ways. For example, you can phone the clients when there are only a few days before the due date.

Define a chasing process

You need to define the outline of your chasing process. When you will send early and late reminders; when you phone them; when you ask the lawyer to intervene; when you will go through the legal process .. etc.

For example, your may say:

  • After every 7 days within the payment due date, I will send a kind reminder.
  • I will send daily reminders in the last 3 days of the due date.
  • After passing the due date, I will send a past due invoice email asking for payment.
  • After further 5 days, I will send another past due email with the penalties.

Make a direct call phone

When you receive no response, you can reach out in a phone call. This will ensure that they receive the reminders (sometimes they receive nothing due to a system problem). It also makes it much faster to get paid, as when a client hears your voice, he would probably take action.

Write a statement of accounts

When you have multiple outstanding invoices for a certain customer, you may need to issue a statement of accounts. It is a document that lists all the transactions and invoices related to your client with their due date in a specified period of time. It summarizes all the outstanding invoices into one invoice or document.

Note: If you are using invoicing software such as online Invoices, this process would be done with a click (tracking, collecting, sending, and following up with payment).

Prepare For Negotiation and Partial Payment

In the process of chasing your late payment, you may find that your client is suffering a crisis. At this time, you may need to negotiate with them and give them an opportunity for partial payment.

Get a debt collector & a lawyer

You could hire a part-time/full-time debt collector or/and a lawyer to take care of your past-due invoices. They are usually trained in what they do and could professionally approach your late clients. Lawyers could make the approach shorter by dealing with the entitled departments officially. Lawyers would also deal with your bad clients in courts.

Create an accurate record of your chasing efforts

You need to document all the steps and effort spent in chasing and following up with your clients. Some clients may claim that they got no reminders, no goods, or even no invoice. You need to keep everything documented for further negotiation and questioning.

When should you send reminders for overdue and outstanding invoices?

As stated above, you need to specify a chasing system for your past outstanding invoices and due invoices. This would depend on the type of client you have and the nature of your business. But in general, you need to send early and calendar-based emails.

The process usually takes into consideration sending kind reminders before you the end of the due date period. After the due date, you send an overdue email telling them of the penalties specified in the invoice payment terms. Then you gradually follow the above steps.

How To Deal Bad Debt? | Debt Recovery Options

When you deal with bad debt, there are many options that could make it easy for you to follow up with these past-due invoices. But you need to ensure that you followed the above steps and the other prerequisites for sending invoices. If you got no response, the following options could help you follow bad debt:

Follow legal procedures after outstanding invoices

Contact your legal consultant or lawyer to follow and implement the legal options available for your case. The available options are variable according to the situation, country, or state regulations. This option would be totally fine if you have a team who can chase that professionally. They would decide if you need to go with the superior court or with the small claims court.

Issue a tax write-off

When you have an unpaid invoice, you should deduct its tax from your total income and tax files of your business.

Contract with factoring service providers

Sometimes, you may need to contract with factoring companies. They buy your past-due invoices for a percentage of the total invoice. They will be responsible for chasing your invoice.

Contract with collection agencies

For too late invoices (usually after 90 days), you may go with the collection agencies option. They usually take care of these late invoices for a percentage of the recovered money (it may range between 20% – 30%).

Automate Your Chasing Process of Outstanding Invoices

There are a number of late payment chasing statistics report that companies on average spend about months chasing their late invoices. Other studies report that you could case a respected percentage of your invoices for 6 years.

You can automate this process of chasing your outstanding invoices by registering in specialized invoicing software. When compared with the outsourcing options mentioned above. Check the Online Invoices tracking system.

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