Talking Cents

Six important steps to request payment for invoices past their due dates

As a small business accountant or owner, you depend on timely payments from your clients to keep your business running smoothly. However, sometimes clients may miss payment deadlines, and invoices remain unpaid past due dates. In such cases, it is essential to take the necessary steps to request payment for those invoices. Here are six crucial steps you can follow to request payment for invoices past their due dates:

1.   Send a Reminder

The first step to take is to send a reminder to the client. You can do this through email, phone call, or letter. Be polite in your reminder, and make it clear that the payment is overdue. You can also include the payment due date and the amount owed. A gentle reminder can often prompt the client to pay their invoice.

2.   Add Late Payment Fees.

It is good practice to add late payment fees to invoices past their due date. This fee can be a percentage of the amount owed or a flat fee. Late payment fees encourage clients to pay their invoices on time and compensate you for the time and resources spent following up on unpaid invoices. Ensure you communicate the fee structure to the client beforehand, so they know the charges they will incur if they fail to pay on time.

3.   Offer payment plans

Sometimes, clients may have difficulty paying the total amount owed in one payment. In such cases, consider offering payment plans that allow them to make partial payments over a set period. It benefits both parties as it ensures you receive the payment you are owed, and the client does not have to make a large payment all at once.

4.   Hire a Collection Agency

Suppose reminders and payment plans fail to result in payment. In that case, you can hire a collection agency to collect the outstanding debt. A collection agency can work with the client to negotiate payment terms or take legal action if necessary. However, hiring a collection agency should be the last resort as it can be expensive and may harm your business relationship with the client.

5.   Issue a Demand Letter.

You can issue a demand letter if the client ignores your reminders and payment plans. It is a formal payment request stating the amount owed and the consequences of non-payment. A demand letter can prompt clients to pay their invoices to avoid legal action. You can send demand letters via registered mail, email, or hand-delivered. 

6.   Take legal action

You can take legal action to recover the outstanding debt as a last resort. You can file a lawsuit or use a debt collection agency. However, legal action can be costly and time-consuming, so it should only be considered if all other options have been exhausted.

As a small business accountant or owner, unpaid invoices can be a significant challenge. However, following these six crucial steps can increase your chances of receiving payment for invoices past their due dates. Remember to communicate effectively with clients, add late payment fees, offer payment plans, and other tips mentioned in this post.

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