An invoice can easily get overlooked or a customer might even deliberately delay payment because of financial difficulties. Whatever the reason, many companies face cash flow problems due to late payments. Number one priority should be to prevent defaults on payments.
My customer hasn’t paid — what do I do?
The order’s been completed, the invoice has been issued, but the customer still hasn’t paid. For small businesses in particular, this can become a real problem. Here’s what business owners can do about it, and what they should avoid.
Prevent defaults on payments
To avoid waiting too long for their money, here are a few tips companies should consider. Invoices should always be issued promptly — ideally immediately on completion of the order. It can also be helpful to bring forward the payment due date. Anyone who has previously allowed 30 days can, for instance, stipulate in the contract that the invoice must be settled within 14 days. So even if there’s a delay in payment, you still have something of a buffer. Other options, depending on the size of the order, include advance payments or interim invoices. In some industries, discounts on early payments are also a common way of encouraging customers to settle the amount due faster.
Tip 1: If anything seems suspect to you ahead of the order, you should find out more about the customer beforehand and check their creditworthiness.
Tip 2: With QR-bill, issuing and paying invoices is incredibly easy. This helps both the invoice issuer and the invoice recipient.
Communication about outstanding payments
If a payment default occurs, it’s important to respond quickly. Once the deadline has passed, the easiest and most amenable thing to do is follow this up in person, over the telephone, or via e-mail. Maybe the invoice didn’t reach the customer or has simply been overlooked due to things being so busy. If the customer has a liquidity problem, the best case scenario is if both parties can agree on a new payment date or an instalment plan. If the customer can’t be reached or payment is still not forthcoming, a friendly payment reminder can draw their attention to the outstanding amount. Particularly with regular customers, it’s advisable to have a further conversation before sending the first formal overdue notice. Indeed, it isn’t wise to send an overdue notice straight away or even to threaten to do so. This is usually counterproductive and may even fall under coercion.
Hint: A friendly approach will get you further, but by the same token, you should not be going cap in hand. A service rendered should be paid for.
Procedure in the case of non-payment
First ask in person, over the telephone, or via e-mail.
Don’t immediately start sending formal overdue notices or unfriendly letters.
Send a friendly payment reminder.
Dispense with default interest and large fees for issuing overdue notices, wherever possible.
Where necessary, try and clear things up with a further conversation.
On no account issue threats. Remain matter-of-fact and professional.
If none of these steps get you anywhere, issue the first formal overdue notice.
Do not apologize; you are entitled to payment for your services.
Collect outstanding payments
Although a default action — or ultimately even debt collection — is unpleasant, you should carry through your claim politely and matter-of-factly. If not contractually stipulated, each enterprise can decide for themselves how many overdue payment notices they will send and whether they want to charge default interest and fees for the notices. If the final notice doesn’t prove effective, you can either accept the loss or initiate debt collection proceedings.
Tip: It’s important to always keep track of outstanding invoices. This is particularly easy when using an online tool for managing accounts receivable and accounts payable, such as SmartBusiness from PostFinance. This tool can even be used to initiate debt enforcement proceedings via tilbago — again, online and simply.