{"id":5850,"date":"2019-04-22T17:22:10","date_gmt":"2019-04-22T14:22:10","guid":{"rendered":"https:\/\/www.lending-express.com\/blog\/?p=5850"},"modified":"2019-06-10T13:58:49","modified_gmt":"2019-06-10T10:58:49","slug":"unpaid-invoices","status":"publish","type":"post","link":"https:\/\/www.become.co\/blog\/unpaid-invoices\/","title":{"rendered":"5 Strategies for Dealing With Unpaid Invoices & Non-Paying Customers"},"content":{"rendered":"\n

Unpaid invoices pose a serious issue to companies of all sizes and in a wide variety of industries. For small and medium-sized business owners particularly, this can lead to a whole host of other problems such as the inability to hire new employees or to even pay themselves. When clients are refusing to pay their invoices, they\u2019re causing a ripple effect that leaves an impact far beyond a simple \u2018overdue\u2019 status on their account.<\/span><\/p>\n\n

\u2714 What do non-paying customers mean for a business\u2019s productivity?<\/span><\/p>\n

\u2714 Where do businesses feel the consequences of unpaid invoices?<\/span><\/p>\n

\u2714 More importantly, how should you handle non-paying customers?<\/span><\/p>\n\n

You\u2019re not alone in the struggle to get your invoices paid on time. Learn the tricks of how to handle non-paying customers, below…<\/span><\/p>\n\n

5 tips for handling non-paying customers<\/span><\/h2>\n\n

Stuck with unpaid invoices and unsure how to handle non-paying customers? There are several ways to go about solving this cashflow conundrum. We\u2019ve boiled it down to the essentials for you – use these 5 tips to avoid non-paying customers like the plague!<\/span><\/p>\n\n

Top 5 tips for handling non-paying customers:<\/b><\/p>\n

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  1. Explicitly state due dates<\/span><\/li>\n
  2. Implement late fees<\/span><\/li>\n
  3. Send collection reminders<\/span><\/li>\n
  4. Offer payment installments<\/span><\/li>\n
  5. Use invoice factoring<\/span><\/li>\n<\/ol>\n\n

    We\u2019ve given you the bare-bones of the list, now we\u2019ll build on that foundation to explain how you can actually put those solutions to use.<\/span><\/p>\n\n

    1. Explicitly state due dates<\/span><\/h3>\n

    In order to avoid any confusion about when payments are expected, there should be a contract involved with your services and, of course, terms and conditions that are included. In that agreement, the due date(s) should be shown clearly, boldly, and in plain language.<\/span><\/p>\n\n

    Alongside the customer\u2019s payment due dates, you should also include the projected timeline of completion for your services. As you keep your word and stick to your end of the deal, it\u2019s all the more likely that the customer will do the same (though there is no guarantee of course).<\/span><\/p>\n\n

    Top tip:<\/b> Communication is essential and should always be the first step that you focus on when it comes to avoiding unpaid invoices. Don\u2019t let confusion be the cause for non-payment of invoices.<\/span><\/p>\n\n

    2. Implement late fees<\/span><\/h3>\n

    Consequences act as a disincentive to clients who are refusing to pay invoices. But, the non-payment of invoices is not always intentional; some people legitimately cannot make a payment on time. For that reason, it might be counter-productive to <\/span>only <\/span><\/i>offer a punishment in the form of late fees.<\/span><\/p>\n\n

    Top tip:<\/b> You can always approach the situation from the other direction; instead of punishing with late fees, you may choose to increase the rates from the get-go and then offer a discount for customers who make an early payment. In either case, your goal is to nudge your customers to pay before the deadline.<\/span><\/p>\n\n

    3. Send collection reminders<\/span><\/h3>\n

    Whether by email, text message, or old school snail mail, sending reminders to non-paying customers is one of the best ways to obtain what you are owed. The fact is, people often get busy and lose track of their affairs. Give clients the benefit of the doubt and send them a friendly reminder if they have unpaid invoices.<\/span><\/p>\n\n

    Top tip:<\/b> Address the client by name, not with a generic \u201chello valued customer\u201d. Include the amount due in a bold and bright font so that they don\u2019t need to search for the important information. Simplify and quicken the payment process for them, don\u2019t make them jump through hoops to pay you.<\/span><\/p>\n\n

    4. Offer payment installments<\/span><\/h3>\n

    For B2C services specifically, accounts with unpaid invoices may be failing to repay what they owe all at once, but could very well be able to pay back their debt in installments. While you may choose to include some nominal fee for clients who opt to make payment installments, it could ultimately ease the strain that non-paying customers have on your business\u2019s cash flow. Something is better than nothing, after all!<\/span><\/p>\n\n

    Top tip:<\/b> The amount and manner in which you charge installments will depend on the industry you\u2019re in. For example, a <\/span>construction company<\/span><\/a> may decide to charge as they finish different parts of the job. Giving the option to pay in installments is one way to make sure that you won\u2019t be stuck handling a customer not paying their invoice.<\/span><\/p>\n\n

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    Of course, the type of business will affect the kind of industry loans<\/a> a business needs,<\/span> as well as the specific circumstances that business finds itself in. Be sure to weigh your options carefully in order to choose the right funding solution for your business.<\/span><\/p>\n<\/blockquote>\n\n

    5. Use invoice factoring<\/span><\/h3>\n

    When customers are not paying invoices, and you don\u2019t have the time or resources to chase after them yourself, invoice factoring can come in handy. So <\/span>what is invoice factoring<\/span><\/a>? Essentially, it\u2019s the process of selling unpaid invoices to a lender who will then collect the overdue payments themselves. Typically, the lender will pay around 80% up front and then the remaining 20% after collection, keeping roughly 1-4% for themselves as payment for their services.<\/span><\/p>\n\n

    Top tip: <\/b>Applying for invoice factoring<\/span><\/a> doesn\u2019t require any collateral, which is a great advantage for small businesses. But it is important to keep in mind that the fees imposed on you by the factoring company will be largely shaped by how quickly your customers actually do pay. In other words, the quicker your customers pay their bills, the better the terms are for you (generally speaking).<\/span><\/p>\n


    \"Non-payment<\/p>\n\n

    SEE IF I QUALIFY<\/a><\/strong><\/span><\/p>\n

    How serious is the problem of unpaid invoices for small businesses?<\/span><\/h2>\n\n

    Non-paying customers present a real obstacle for the proper functioning of small businesses, as well as the economy as a whole. When a client is refusing to pay an invoice, it creates a butterfly effect. What appeared to be a relatively small occurrence eventually turns into a much bigger problem with the potential to do real damage.<\/span><\/p>\n\n

    Research done by our partner Fundbox (published in <\/span>Entrepreneur<\/span><\/a>) has suggested that there are several consequences that manifest as a result of customers not paying their invoices, including:<\/span><\/p>\n\n