We’ve all been there: tracking down an outstanding invoice from a customer. It’s time consuming, frustrating, worrisome, and frankly, it’s just plain not fun for either party involved. With B2B businesses losing nearly 52% of the value of invoices when they’re not paid within 90 days of the due date, this is a problem that needs to be faced head-on. But the question is, how? How do you approach a customer who owes you for a delinquent invoice? What are the proper protocols? How do you make sure that you’re getting paid without interrupting cash flow? Let’s talk about the right way to approach these hurdles while still offering a phenomenal customer experience.
Establish a routine. Like we’ve said before, establishing an invoicing routine is key, especially with 38% of invoices not being paid on time. Make sure that you are sending invoices on a regular, predictable schedule, so customers know when to expect to reconcile an invoice. Bear in mind having a routine accounting schedule doesn’t just benefit your customer; it also benefits you. By establishing a routine for invoicing, you’re establishing a routine for cash flow.
Accept credit card payments. While this tip might seem out of place when discussing how to follow up on delinquent invoices, it actually goes hand in hand. By simply accepting credit cards, you give your customers an easy payment option that most of us are accustomed to. Not to mention that by accepting credit cards as a form of payment, you can usually bypass all of the headaches that come along with late payments and collecting receivables. You can even store credit card information to establish recurring billing.
- Pro tip: Accept a credit card payment regardless of the amount. If your volume is where you want it to be, accepting credit cards (and the fees associated with them) won’t matter in the long run.
Create a follow-up protocol. With 38% of invoices being past due, and 5.2% of those being left unpaid at 90 days, it’s important to have a follow-up protocol. At Acuity, we have made it a part of our routine to follow a step-by-step protocol for collecting past due payments. Start by having a firm grasp on your invoicing schedule. Since we bill weekly, our protocol is within those parameters.
- Pro tip: Don’t reinvent the wheel on your protocol. We borrowed ours from a local collections company and tailored it to our needs.
A guide for how to follow-up on past due invoices and keep customers happy:
- After three outstanding invoices, follow-up with a soft email. For us, that’s at about 22 days. This is a quick, friendly reminder note about the outstanding invoice. Remind them of the payment terms as well as the records of payment. Include phrases like “thank you so much for your business” and “let us know if your records indicate a different balance.” This should be a gentle reminder.
- About a week later, shift mechanisms for communication. If you started with an email, make a phone call. Likewise, if you started with a phone call, try an email. If you are using a phone call, it’s a good idea to have a script to use. This will keep your outstanding invoice calls consistent.
- After 40 days or so, start to shift your tone. Don’t hesitate to be slightly harsher or recognize the need for urgency, however, stick to the facts. A blanket “Our records indicate your invoice is past due,” email works well here.
- At this point, plan to involve your operational team about the issue as well. Be sure that your protocol establishes three touches with the customer before escalating to involve someone with more authority internally.
- Around day 50, send another medium tone email to the customer. Remind them of the payment terms (our invoices are due upon receipt) as well as the outstanding balances.
- Approximately a week later, it’s time to escalate your tone to one that would be considered harsh or serious. Use phrases like “your immediate attention is required” and “your account is seriously past due” to spark urgency and concern. At Acuity, we understand if a customer needs to negotiate their bill or payment schedule, we just want open communication. Decide if this strategy works for you. If it doesn’t, add your terms to your protocol.
- At this point, send another internal email to your operational team letting them know about the situation and encouraging their involvement.
- By days 80 and beyond, it’s time for a final, harshly worded email. Useful phrases here include things like “this matter is urgent” and “your complete attention is required.”
- If you still don’t receive any communication about the outstanding invoice after 90 days, it’s time to move on to a collections agency.
By sending emails and documenting phone calls, you’re keeping a record of your attempts and your communication with this customer. This is going to be key when it’s time to move towards collections. Stay tuned to part three in our series: working with collections.