Debt collection is usually one of the least desirable jobs small business owners have to engage in. Unfortunately, collecting invoices that are due is critical for companies that need to maintain a steady financial backing to keep operating.
Dealing with customers who don’t want to pay their bills can be challenging. In some cases, it’s necessary to introduce urgency into the situation. Finding ways to do this is critical for past-due invoices.
Provide firm due dates
Some customers may not realize that there are firm due dates for invoices. While it might be tempting to say things like the balance is due “net 60,” not all customers will understand. Instead, it’s best to put an actual due date that includes month, date and year so there’s no discrepancy about when payment is due. Ensure the due date is easily visible on the invoice.
Outline past-due penalties
Outline the penalties that come with late payments. If your payment formula is based on a percentage model, putting the actual dollar amount for the late payment on the invoice may be beneficial. Tiered penalties also need to be written out clearly. These include late payments based on the number of days the invoice is past due.
Offer payment plans
Customers may not pay an invoice if they can’t pay the balance. To combat this, you can include payment plan terms you’re willing to accept. Make it clear that the entire balance will become due if the payment plan is used and a payment is missed.
Establish immediate payment incentives
Some customers may be more responsive if you include an incentive for immediate payment in full. This might be as minor as offering 5% off if the balance is paid within 10 days of sending the invoice. Make the terms easy to understand and straightforward so customers know how to take advantage of the deal.
Warn of legal action
Some customers still won’t pay even if you send them invoices, so you may have to outline what legal action is possible. This is typically a last resort and should only be done if you intend to follow through.
Ultimately, business owners have to do what’s best for their businesses. Reviewing their options and seeking legal guidance concerning the collections process may be beneficial. This enables them to learn their options and set a plan to collect what’s due to their company in ways that are likely to be effective for their circumstances.