Calling clients to remind them of past-due invoices is the worst. Who has time for that?
Before investing in new debt collection practices, try nipping the problem in the bud. Make it easy for customers to pay bills on time, and you’ll spend less time chasing down the money you’re owed.
How to get customers to pay bills before they’re past-due
When you make paying on time a no-brainer, you can cut down on the number of debtors you later have to chase.
You: “But Zembr! I send the bill, they pay the bill. How much easier can it get?!”
We hear you. Paying bills on time should not be hard. And yet here we are, talking about customers that can’t seem to do it. Our lovely team of virtual bookkeepers offered the following tips to remove the friction from your accounts receivables:
1. Review your invoice setup. Are your invoices easy to understand? It’s hard to blame someone for not making a payment if they don’t understand what it’s for, how much they owe, or when it’s due. Every invoice should include:
An invoice date and payment due date
A unique invoice number
An itemized list of the products or services sold
A clear and obvious amount due
Payment terms, including acceptable payment methods and any late fees that will be assessed
2. Give an upfront payment option. If you can, offer customers an incentive for paying in advance, like a discount or bonus service. Is a 3% discount worth the peace of mind cash in hand brings? That’s up to you. Even if you don’t offer an incentive, make it possible for people to pay at least some of their bill in advance.
3. Use direct debit. If you have customers on recurring payments, set up a direct debit system and strongly encourage them to use it. The system automatically debits their account the same amount each month. Easy peasy.
4. Send invoices to the right person. Your business contact might not be the person writing the checks. Instead of counting on your contact to forward the bill to the right department, set up the client account so invoices go straight to the person responsible for paying them.
5. Send reminders. Once you’ve sent your invoice, don’t wait until it’s past due before you talk to the client again. About a week before the due date, send your customer a friendly email reminder that they haven’t paid yet. If you charge late fees, this is a good time to remind them the clock is ticking. Send the email to both your business contact and the accounting department.
Conversations about money only feel awkward if you let them. You have a business relationship with your clients - they know they need to pay you. So don’t let any shyness or awkwardness keep you from asking for what you’re due.
We really wish we could promise that if you follow these tips, you’ll never have to collect on a past-due invoice again. We’d also love to tell you a unicorn is on its way, bringing you a rainbow cart filled with ice cream. But sadly, neither of those things is true.
No matter how easy you make it, you will still have the occasional customer who doesn’t pay their bill on time. What then? That’s why we wrote this post on how to collect on past-due invoices without feeling like the villain.
