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Chasing overdue payments from customers and suppliers is time-consuming and a task that no one enjoys. Unfortunately, the pandemic has caused significant ripples throughout eCommerce, and not everyone has thrived. Stock shortages have been rife, and shipping delays and delivery exceptions have become major stumbling blocks.
As the dust settles and we embrace the new normal, many businesses are still feeling the after-effects of the last two years, which has put many of them on a back foot financially.
If you're battling overdue invoices and your cash flow has taken a knock, try these tips for getting your outstanding invoices settled.
7 Tips to Deal with Overdue Invoices from Customers
1. Send a Polite Reminder
When there's money involved, it's always best to stay civil, everyone knows the importance of paying on time, so if an invoice is only overdue by a few days or weeks, then it's best to refrain from confrontational language.
Using the term "friendly reminder" could work in your favor, as people often forget to pay an invoice rather than do so purposefully. Keeping your cool is essential in this situation. As frustrating as overdue invoices are, you wouldn't want to give your online business a bad name.
Always use a professional and friendly tone as this can make a difference in the future. A customer will remember how you treated them, even if they were at fault for not paying on time. Losing regular customers over one late invoice could cost you far more than a simple, friendly reminder.
2. Send A Statement Of Account
If your reminder hasn't gotten the desired result, a statement of account may help. Instead of sending your statement as part of your original invoice email and reminder thread, start a new chain. You can add an attention-grabbing subject to the subject line and keep communications completely separate.
Something like: URGENT! Overdue account is going to attract attention and is much harder to ignore. You can then include a statement of account and highlight the unpaid amount.
If the customer has an order pending, you can advise them it won't get shipped until the overdue invoice is settled. Sometimes, this is a far more effective course of action as it negatively affects them, too. They may well decide, as they need your product to keep their business afloat.
Related: How to Organize Customers Orders
3. Offer A Payment Plan
Getting paid in installments over an extended period is better than not getting paid at all.
If a customer is battling to make the total settlement, offer them the option of a payment plan. You can split the owed amount into smaller amounts due over a couple of months and add a small amount of interest or additional late-pay charges to compensate for the extra time.
This is an excellent compromise, especially when businesses may have suffered from an interrupted cash flow.
4. Provide Additional Payment Options
If you've only offered a few payment options, see if you can expand on these.
If possible, offer your customers the opportunity to pay by credit card or PayPal, as they can use a line of credit to make a settlement. If you're only offering the option of a bank transfer, they may not have the available funds to settle, and that's why the invoice is overdue.
Studies show that the more payment options available, the quicker people are to pay invoices. Use this to your advantage and offer various payment options for a quick settlement.
5. Offer A Discount For Settlement
This may seem counter-productive, but if you can offer a discount for settlement, you're offering an excellent incentive for customers to make payments. You can submit a discount when you follow up the first time or wait a bit longer if a speedy settlement hasn't happened.
If a customer has forgotten to pay, you may be unnecessarily offering a discount, so keep this tip for when you need it. Again, a slightly discounted payment is better than not receiving a cent.
6. Make Getting In Touch A Priority
If your follow-up emails go unanswered and your offer of a payment plan or discount goes ignored, what's next?
If your customers aren't replying to your email correspondence, see if you can contact them via social media or telephone. A quick online search may reveal several other forms of contact methods you can try. Just ensure that you keep the matter private, whatever form of communication you choose. If you go public with your issue online, you may run into legal trouble.
Emailing, calling, and messaging on social media is an excellent way to keep a record that shows you've made a concerted effort to follow up. If you must take legal action, this will be in your favor, as you have proof that you tried every possible point of contact.
7. Write Off Your Loss
If there is no reply from the customer and taking legal action is going to become time-consuming and expensive, you can opt to write off the amount owed. This isn't ideal; however, sometimes it's necessary, especially if it's not a considerable sum.
You can learn a lot from this and update your processes and procedures to ensure it doesn't happen again. You may want to add a penalty clause to your invoice template to cover you for future late payments or only to accept COD costs. Although COD can become tricky with suppliers, it may be a good option if you are working with new customers from whom you don't yet have a proven payment track record.
The Bottom Line
Now that you know how to deal with overdue invoices, it's time to put this information into practice. Remember to stay calm and collected when speaking to your customers; after all, you're the expert in this situation. Use our tips to get back on track and start seeing those payments come in.
Partnering with a 3PL like Simpl will help to streamline your operations and manage your inventory, leaving you with plenty of time to focus on other important things, like getting those overdue invoices settled!
