Invoicing

5 Ways to Get Overdue Invoices Paid

Dec 23, 2019 • 5 min read
Small business owner managing her invoices
Table of Contents

      Ask any self-employed person the toughest thing about their job, and they’ll tell you it’s dealing with unpaid invoices. Past-due invoices can threaten a sole proprietor’s ability to pay rent, keep supplies in stock, or even keep the lights, phones, or utilities on. 

      Self-employed 1099 contractors are particularly vulnerable to late invoice payments. No business can operate with customers who don’t pay, but sole proprietors know that overdue invoices can raise the scary specter of overdraft bank fees, skipping meals, or inability to make rent or mortgage payments.

      Full payment of invoices can help you get control of your finances. To get all of your invoices paid on time might sound like a fantasy, but there are a few strategic and technical options to make prompt payment more likely. 

      1. Improve Your Invoicing

      The best way to improve invoicing is to set up systems that generate your invoices automatically, either on a monthly basis for ongoing work or upon the completion of a task once it’s finished. You can use small business bookkeeping software to reduce time-consuming manual invoicing and to ensure that your automated calculations are error-free. 

      One of the best bookkeeping software for small businesses is Lendio’s software, which automates customized invoices for you. Lendio’s software also comes with an especially tantalizing option for freelancers by allowing client payment by credit card, ensuring that invoice gets paid in full on its due date and not a minute later. 

      2. Set Payment Expectations on the Invoice

      Know how phone and utility companies treat you when your payment is past due? You’re a business too, and you’re allowed to do the same thing.

      Communicate clear payment terms right on your invoice template. You can set a payment due date on the invoice itself or say explicitly on the invoice that payment is expected within, say, 30 or 60 days.

      If you’re submitting an invoice to a client who has not paid their previous invoice, feel free to tack on an additional notice along the lines of “Second Notice—30 Days Past Due.” You may have seen a similar message on your bills before.

      You can also legally charge interest—but you must communicate this charge to the client in the form of a work estimate, contract, or agreement. This penalty may seem an extreme measure, but small interest rates like 1.5% are not uncommon.

      Do realize that if it’s your first invoice to a certain vendor or client, they may need certain information like your Taxpayer ID number, bank routing information, or other financial details. Getting this information to a new client is essential to getting paid on time. 

      3. Be Diplomatic, But Firm

      A 3–5 business day delay on payment is regrettably standard across many industries, so it’s best to wait that long past a due date before escalating. During that time, double-check that you followed all of the correct procedures communicated to you, as you’d hate to complain only to find you’re the one in error.

      Friendly reminders may do the job. Send an email that says, “Just checking on the status of the invoice submitted,” and use a closing salutation like “Regards” or “Thanks!” If that doesn’t work, you can resend the invoice a few days later with a more stern reminder that “This invoice is now overdue and payment is required.”

      You may want to escalate to a direct phone conversation if previous strategies haven’t worked. Maintain a friendly demeanor, but ask directly if there is an issue with the payment, which should at least prompt some sort of explanation. But stay as diplomatic as possible if you want to continue working with this client.

      4. Require Deposits, Retainers, or Up-Front Payment

      No one wants to work for free. If you’re a freelancer, try to look for established clients with a demonstrable history of paying their contractors.

      A small business can require a retainer, deposit, or some amount of payment up front before investing time and resources. Payments can also be structured as milestones, or upon hitting certain prerequisite tasks required to complete the project.

      5. Keep Accounting Statements

      Accounting statements are a bookkeeping software benefit that can automatically aggregate multiple past-due invoices to a client and can also be configured to send automated reminders. Other features like monthly financial reports can create invoices for you, plus financial statements you need—because those quarterly self-employment tax payments will be due whether your clients have paid you or not. 

      You can take an extreme non-payment case to small claims court, but you’re burning the bridge at that point. You’re also looking at possible legal fees that could exceed the unpaid invoice amounts. At that point, consider hiring an attorney to send an aggressively worded letter and see if that brings about compliance.

      No one wants the invoice situation to become a legal hassle. You can sign up for Lendio for free, get automated credit card payments from clients, and enjoy payday more frequently. 

      Customized invoicing makes getting paid quick and easy.

       

      About the author
      Joe Kukura

      Joe Kukura is a San Francisco freelance writer whose work also appears in SF Weekly and SFist. He’s written financial advice for NerdWallet, tech industry analysis for the Daily Dot, sports content for NBC Bay Area, and good, old-fashioned clickbait for Thrillist.

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