I Have an Unpaid Invoice – Expert Guide on Debt Collection

I Have an Unpaid Invoice – Expert Guide on Debt Collection

Being owed money is always a stressful situation, which is never good if you are trying to run a business. It can affect both businesses and private individuals, and if left unchecked, can become a bigger problem as time goes by.

Cash flow problems can affect your ability to fulfil your own financial obligations. It has been estimated that 4 in 5 small businesses are affected by clients that have not paid on time.

Many business owners have had to take extreme measures in order to make ends meet. Some have even ended up selling off their own property in order to keep the business afloat. Sadly, many more have had to close down entirely, as non-paying clients have caused too many problems.

For a business, too many unpaid invoices can be catastrophic. Any instance where a client does not pay must be taken very seriously and acted on right away. Some larger organisations have in-house credit control teams that are able to chase payment from a client.

Smaller companies, or those that are self-employed, do not always have this option. It is often the case where the business owner fills many roles, including that of the accounts department. If they are spending time chasing a debt, they are unable to work on

It is clear that issues relating to overdue invoices and debt recovery need to be resolved as quickly as possible. Are you are waiting for clients to pay and have unpaid invoices? If so, taking the right steps can help to ensure that your business maintains its healthy cash flow.

I Have an Unpaid Invoice – How to Make Sure You Get Paid

Making sure that all of your clients get their invoices paid is always a challenging prospect. In the case of small businesses and self-employed, non-paying clients can represent a significant blow to monthly profits.

Knowing the correct course of action to take when facing an unpaid invoice can make the difference when it counts. Our debt collection experts have listed their recommendations on how to handle an instance of unpaid invoices.

Create Payment Terms

It is common (and recommended) for businesses to set up “payment terms” on all of their agreements. This should always be done before committing time, money and other resources.

Payment terms are presented to a customer before any work is done. They detail what the customer must do with regards to paying for a businesses goods or services. A good payment terms document will clearly explain what the customer needs to be aware of. They should also always know of any potential consequences or penalties that might be actioned if they choose to withhold payment.

Lastly, the customer should always sign the document once they are aware of and have agreed to the terms. You should also provide a copy of these terms to your customer once the agreement has been finalised. Most businesses operate on payment terms of 30 days, with some larger companies choosing terms of up to 60 days.

Customers will be aware of what they are required to pay and when it is due. As the terms should always be agreed upon, they will not be able to claim ignorance. This is a tactic that some debtors often try to do.

I Have an Unpaid Invoice – Chasing for Payment

Despite the best-laid plans, many people will seek to test you and attempt to avoid payment no matter what. Unfortunately, it is common for unpaid invoices to occur, and when this happens it is important to chase for payment swiftly.

Every invoice you issue should have a due date on it that is marked clearly for your customer. If there is no payment made to you by this date, you should begin chasing for the debt.

The best way is in a letter sent via recorded delivery or in an email with a read receipt. By doing this you will be able to prove that your debtor has received and accepted the message. Phone calls are also an option, but only when you have the means to record the message.

The best way to chase a debtor for payment is by sending a professional reminder letter to them. This reminder should politely inform the customer that their payment is now overdue and must be paid as soon as possible. You should also include a copy of the original invoice, as well as the payment terms if they were signed.

It is common for reminders to be missed or ignored, and as a result, you may need to send several. A good schedule to keep is based on the number of days since the invoice was overdue:

• Less than 14 days – Send the first reminder
• More than 14 days and less than 30 – Send the second reminder
• More than 30 days – Send a final notice

Your final notice letter should signal your intention to take professional action against the debtor should payment not be forthcoming. This may be to instruct a debt collection agency or take legal action, depending on what your choice is.

Sending letters such as this is a good option for smaller businesses where resources may be more of an issue. Taking these steps will allow you to continue focusing on your business whilst moving the debt recovery process along.

I Have an Unpaid Invoice – Finding Professional Help

Whilst issuing payment reminders will be effective in some cases, it may not work against those determined to avoid payment. Many will wrongly think that you will not carry out your intentions to escalate the matter.

Have you contacted the debtor and they are still withholding your money? If so, it is a good idea to involve a third party at this point to resolve the matter. It may not be cost-effective to continue to chase the debtor yourself at this point.

When involving a third party, many business owners choose one of two main options.

Taking Legal Advice and Court Action

A common way that people have chosen historically is to take the issue of debt collection to a small claims court.

This can be very effective, however, this success does come at a great cost in both time and money. Going through a county court to claim money from a customer can become very expensive. Many smaller businesses (and limited companies) end up writing off the debt when the cost of collection overtakes its value.

Many business owners submit a case to money claim online. This results in the government issuing a notice for payment to be made within 21 days or legal action will commence. However, the claimant is required to pay court fees, which can mount up as the case drags on.

Instructing a Debt Collection Agency

Hiring the services of a professional debt collection agency has become increasingly popular in the last few decades.

Debt collection agencies are experts at recovering money in a manner that is both professional and low cost. They are able to resolve the issue amicably, leaving future business opportunities open.

Frontline Collection has helped thousands of businesses and private individuals recover millions of pounds worth of unpaid debt.

If you have unpaid invoices, speak to one of our debt collection experts today.