As a sales executive, I get my share of unpaid invoices.
And when you are in business for yourself it becomes all-to-easy to forget about the money you are owed until it is too late.
However, there are several things that I do before taking legal action against my clients that allows me to chase down my unpaid invoices without spending any more money than absolutely necessary.
But the question is, how do you chase unpaid invoices?
Preventing unpaid invoices
What's better than chasing unpaid invoices?
Stopping them from happening in the first place.
The first thing I always do is send out reminders on the date or around the time when payment was due.
Every client has their own preferred way of doing business, so while some clients may not expect an invoice on receipt of work others might be more susceptive to email reminders if they missed the original invoice.
This small act of chasing down my money can often lead to a prompt payment without the need for legal action.
In addition, I try to remind my clients that they have not paid me at least once a month if their invoice is still open.
This will add up over time and I am sure you've all seen on TV how these companies lose money by simply
Another way to do it is to prevent your clients from sending unpaid invoices is to set an interest rate on overdue accounts.
I usually charge my clients 1% per month on late invoices, but some people go as far as charging up to 5%.
This may seem like too much, but this is how business works and if your client does not want to pay these fees then they can simply pay you on time.
There are also companies that offer different credit services where you can enforce certain policies or late fees, but I have never gone this route because it costs more money than the default payment plan works for me.
However, if you are not satisfied with your current credit terms then you should look into the different services that are available to you.
What to do if you have unpaid invoices
By now you have probably accepted the fact that there are people who are not going to pay bills on time, so once you determine that your client is not responding well to emails or phone calls then it may be time to take legal action.
However, before you take this step I would recommend sending one last email to your client letting them know that you have no other choice but to turn this matter over for collection.
This has never happened to me, but I have heard horror stories about how clients react when they receive a letter from a lawyer representing the company that is chasing their unpaid invoices.
What legal action can you take?
There are several different courses of action that you can take when your clients do not pay, but I am going to touch on the two most common and the ones that seem to work for me.
Option 1: You can accept payment after they have been sued
This is a very effective way of getting paid if you have clients who owe you a lot of money, but I have never had to do this because most companies settle out of court.
In addition, the cost of filing a small claims suit is not that expensive and rarely goes above $50 if all you are trying to get from your client is paying.
Option 2: File A Lawsuit
This is not a course of action that I have taken, but it works very well if you are owed more than $5000.
However, this could get expensive depending on the total amount you are trying to claim from your client if they don't pay.
Also, there are other policies in place for small claims lawsuits so make sure you check with the court that you are filing with to see if there is a limit.
Unpaid Invoices Email Templates
For clients with small accounts that seem to have just forgotten about the invoice:
Hello [client name]!
This is [your name] with [your company]. We just wanted to give you a quick reminder that invoice [invoice number] is due on [due date] in the amount of [invoice amount].
If you experience any problems with payment, please let us know and we’d be happy to help!
For clients with moderate accounts, who have been putting off payments for a while.
Hello [client name],
This is [your name] with [your company]. We noticed you have an unpaid invoice from [invoice date], which will begin/has begun accruing interest/late fees as of [date the fees came/will come into effect.]
Prompt payment of this invoice will reset the late fees for the next invoice. Let us know if you have any issues or questions.
For when a large client has been delinquent on payment for a long time.
To the payments department at [their company name]:
Please note that invoice [invoice number] is overdue by [amount of time since invoice was due]].
Because of the potential effects of this non-payment on our core business, we have been forced to consider legal action against [their company name] in order to receive our funds.
Please contact us at [contact info] so we can discuss your account, potential agreements, and next steps.
[your company name]
Remember: After legal action officially begins, you should no longer contact the non-payer directly. Leave it to the lawyers and the court.