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How to Chase Outstanding Invoices without Losing Clients

An illustration of a man riding a slim bicycle holding an outstanding invoice on his left hand.

Communicate payment terms to clients ahead of time to help plan cash flow and prevent damage to your credit standing.

Lower the chance of late payments by requesting payment in advance. Consider offering flexible payment options.

Include a late payment fee on overdue accounts to discourage clients from receiving outstanding invoices.

Regularly remind clients of unpaid invoices through friendly emails and seek legal advice if necessary.

When you issue an invoice for your business, it becomes easy for your clients to forget about the money owed until it is too late. 

However, there are several things that you can do before taking legal action against your clients, which will allow you to chase down unpaid invoices without spending any more money than necessary.

But the question is, how do you get paid for an outstanding invoice?

What Is an Outstanding Invoice?

An outstanding invoice refers to a sales invoice that was successfully sent to a client but has yet to be paid.

Other terms for outstanding invoices include "unpaid invoices" or "open invoices."

When you create an invoice, the payment terms will be the key indicator that informs the client to pay for the products or services purchased within the given time - for instance, 30 calendar days.

The invoice will be considered outstanding if the buyer doesn't pay within the given timeframe.

đź”–Did you know: Outstanding invoices and overdue invoices are not the same? Overdue invoices are unpaid invoices that have passed the due date listed in the payment terms.

How Outstanding Invoices Can Impact Your Business

It's always important to clearly communicate your payment terms to your clients ahead of time. This will not only help you plan your cash flow, but it may also help your clients if they face issues paying you on time.

With your business not being able to receive an invoice payment, you may be at risk of falling behind on your financial status with particular vendors you are in business with. Consequently, this can reflect on your credit standing and approval when you conduct business in the future.

What's better than chasing unpaid invoices? Stopping them from happening in the first place.

A well-done invoice can help in making sure it gets paid. Once you know, the invoice is in good shape. You can rest assured you will chase fewer outstanding invoices.

a screenshot of Statrys' invoicing software

How to Handle Outstanding Invoices?

In business, it is not always certain that you will get your payment on time. There is no guarantee that clients will have to provide you with a payment based on your demand.

However, the good news is you can lower the chance of late payments with some actionable steps that will help you handle delayed payments.

Here are some approaches you can take to prevent and keep tabs on outstanding invoices.

Tip #1 - Request Your Payment in Advance

The first thing you need to prioritize to prevent late payments is to request your clients to consider advance payments.

To do so, you will need to define your projects and understand the capacity in which your client is able to make a payment.

For instance, if the project between you and the client usually takes months, you can offer your client a partial payment when you send them an invoice by including this option on your payment terms.

Making a request for advance payment is a common business practice and should not be neglected. Thus, getting your deposits in advance can be a great preventive measure for late payments.

Tip #2 - Offer Flexible Options for Payments

Your clients may find it complex to make payments only through traditional methods like direct bank deposit.

However, it's important to think long-term by offering your clients a few different options to make a payment online.

You may not even have to send any outstanding invoices at all if you're able to offer them the safest payment options.

This way, your clients can schedule or make payments in a timely manner.

Tip #3 - Include Fees for Late Payments

One way to prevent your clients from sending unpaid invoices is to set an interest rate on overdue accounts. 

Late payment fees are often charged by the business and are added to an outstanding invoice. You can set the amount you want to charge, or you can try to calculate late fees that go in accordance with your business.

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 we haven't opted for this route because it costs more than the default payment plan.

đź’ˇTip: Some businesses will charge 1% monthly for outstanding invoices.

However, please use your discretion and inform your clients in advance so they are aware of this before charging them to avoid any issues afterward.

Tip #4 - Use Invoicing Software

Instead of sending invoices manually, you can opt for an invoicing software. Here are some of the ways software can help you avoid or reduce unpaid invoices:

  • You can easily share invoice details through various channels like email or WhatsApp and include payment links such as PayPal links, PayMe, or QR codes. This feature facilitates the payment process for clients and encourages them to pay faster.
  • You can track when the clients open your invoice email. This helps you become aware of when to send reminders.
  • You can automatically send reminders.

Tip #5 - Consider Professional Legal Advice

Things can get complicated while chasing a payment from your client. If it gets to the point where it's out of your control, you may want to consider seeking legal advice.

There are several different courses of action that you can take when your clients do not pay, but we will touch on the two most common and the ones that seem to work.

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. Fortunately, we 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 the payment owed.

Option 2: File a lawsuit    

This is not a course of action that we 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 check with the court you are filing with to see if there is a limit.

Tip #6 - Notify and Send a Friendly Follow-up Email

You can remind your client of unpaid invoices in different ways.

The most common method used in a business is email.

How to Write a Polite Payment Follow-up Email

When writing an invoice email and sending an email reminder, make sure to include the following details:

  • Your email subject line with the invoice number.
  • An attachment of the invoice you are referring to.
  • A friendly reminder body message for your email that includes a due date.

The following approach may depend entirely on your client's accounts and business size and the period in which the payment hasn't been made. Be sure to use a polite and friendly tone in your email.

Here are some invoice payment reminder email examples you can use:

Email Template: Clients With Small Accounts

Template 1: Small Accounts
Subject: Friendly reminder: Invoice Payment Due
Dear [Client Name],

I hope this email finds you well. I just wanted to follow up on the invoice I sent over for [project name], which is now due.

I understand that sometimes payments can slip through the cracks, so I just wanted to send a friendly reminder that the invoice is now due.

If you have any questions or concerns about the invoice, please don't hesitate to reach out to me. I really appreciate your business and I'm looking forward to working with you again in the future.

Thank you for your attention to this matter.

Best regards,
[Your Name]

Email Template: Clients With Moderate Accounts

Template 2: Medium Accounts
Subject: Second Notice: Invoice Payment Due
Dear [Client Name],

I hope this email finds you well. I wanted to follow up on the invoice I sent over for [project name], which is now overdue.

I understand that unforeseen circumstances may have caused a delay in payment, but I kindly request that you take action to settle the outstanding balance as soon as possible.

Please let me know if there is anything that I can do to help facilitate the payment process. If payment has already been sent, please disregard this email.

Thank you for your attention to this matter. Your prompt response will be greatly appreciated.

Best regards,
[Your Name]

Email Template: Large Account Clients

Primarily for clients that the payment is due for a very long period.

Template 3: Large Accounts
Subject: Urgent Action Required: Invoice Payment Overdue
Dear [Client Name],

I hope this email finds you well. I wanted to bring to your attention that the invoice I sent over for [project name], is now considerably overdue.

As a valued client, I understand that you expect prompt payment, and I kindly request that you take immediate action to settle the outstanding balance. If there is an issue with the invoice, please let me know as soon as possible so that we can resolve the matter.

Please note that if payment is not received within the next five business days, we will have to take further action to recover the debt.

Thank you for your prompt attention to this matter.

Best regards,
[Your Name]

This small act of chasing down our payment can often lead to prompt payment without the need for legal action. In addition, we remind our clients that they have not paid me at least once a month if their invoice is still open.

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. 

⚡Important: After legal action officially begins, you should no longer contact the non-payer directly. Leave it to the lawyers and the court.

Bottom Line

Ultimately, it is essential for businesses to properly manage outstanding invoices in order to maintain a healthy cash flow and financial stability.

While chasing outstanding invoices can be a tedious process, there are various strategies that can be effective when you need to get paid on time. Additionally, It's also important to consider making a professional and proper invoice to ensure that your client is aligned with your request.

To streamline the invoicing process, you can also create professional invoices with ease. Consider using an invoicing tool like Statrys Invoice Generator.

With its intuitive interface, the tool can help you create professional invoices quickly and easily, and best of all? - It's free!

a screenshot of Statrys' invoicing software

FAQs

What are outstanding invoices?

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Is an outstanding invoice same as an 'overdue invoice'?

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How do I ask for an outstanding invoice?

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Can outstanding invoices be considered as an asset?

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