Almost half of invoices are paid late. And one of the biggest issues we see agency owners facing day in and day out is getting the money in.
Getting paid on time is essential for a company’s cash flow and bank balance but it can be a crippling drain on a business owners precious time.
The calls… the emails… the disputes… the queries… it can feel like walking a tightrope between getting paid and potentially souring a client relationship.
Having chased hundreds of overdue invoices using a combination of automation and manual interventions, I have gathered a few top tips on overcoming the most common reasons for not getting paid on time.
#1 Your invoices could be considered a low priority
One issue with getting your invoices paid could be the fact that you are not high on the customers hierarchy of creditors.
What I mean by this term is that your customers will place your invoice according to how important it is to pay. When chasing invoices for these customers, your job will also be to move your invoices as high up the hierarchy as possible.
Some companies only pay ‘on shouting’ terms, meaning they will only pay once they have been specifically asked to once it has become overdue.
By having a consistent chasing process in place you can ensure that every unpaid invoice is picked up on immediately.
This will show your customers that you have a thorough system when it comes to credit control and you are not willing to let invoices become severely overdue. Your invoice is never going to be more important than paying rent, but it may become more important to them than some of their other suppliers.
#2 They believe that they can get away with late paying
As linked to the low priority issue, some customers believe they can slip by without having to pay their suppliers until they are forced to.
One way to get them to pay is to state you will add a fixed fee and interest on the invoice (The Late Payment of Commercial Debts (Interest) Act 1998) if it is not paid within a certain time frame. As long as you don’t have any terms in your contract regarding late payment charges then this statutory legislation will take precedence and can be enforced.
If that doesn’t work then another useful step to implement into your credit control process is to send a Letter Before Action after the invoice is a certain amount of days overdue.
This is a simple letter that can come from a solicitor that will threaten legal action to your client if the overdue invoice is not paid and show them that constant late payments will not be tolerated. If this invoice remains unpaid, you could then take further action and make a claim online.
Make a note of who the common late payers are to ensure that there are no patterns emerging around a particular client. You have to use these methods carefully. Though you are within your rights to enforce the above, you don’t want to do it at the expense of a client relationship, especially when they do eventually pay.
#3 Your customers are struggling for money
This is an issue that can frequently occur, especially with selling to small companies. A lot of our clients can be guilty of being too sympathetic to their clients’ situations and though it can be tough, you need to be wary of doing any work that you may not get paid for.
A way to adapt around this issue is to arrange certain payment dates with your client or even a payment plan so that they can pay any overdue debt over a longer period of time.
If they genuinely don’t have the money then there isn’t much you can do in the short term. One thing you should be doing is to stop the work you are doing for them (if possible) until they have paid the overdue amount. This will ensure that you limit the work that may never get paid for.
#4 A client’s payment run dates do not fall within the due dates of your invoices
It is common for companies, especially big ones, to have certain dates for a payment run.
This means that invoices are only paid at certain points in the month and if there is an issue or if the due date falls after this date, it is likely you will only get paid in the following payment run.
To ensure that your invoices will be paid on time, make sure that the due dates for that particular customer fall within their payment run dates.
As well as this, you can have a clause within your contract that states you will get paid on the first payment run after the invoice has been raised, not the first payment run after it is due.
#5 “I haven’t got this invoice”
One of the most frustrating responses I get when chasing customers is that the client has never received the initial invoice. This may or may not be true but if you do not have a solid audit trail you will have to take their word for it despite it likely being a delaying tactic.
To ensure that this excuse cannot be used, implement an automated invoice reminder campaign into your chasing.
This way, an email can be sent to your client before and after the invoice is due. It is also essential to make sure that the contact email you have is the correct one to be sending invoices to, otherwise, your emails could be lost their end and that is why they haven’t been processed.
If all the above is followed then you will have a solid audit trail that will prevent them from being able to say “I haven’t got this invoice.”
#6 There are mistakes on the invoice
Some companies require certain things to be included in their invoices in order for them to be processed.
These would include, the correct PO reference; Due dates are correct; Any references that would need to be included; any description of products etc.
Make sure you have a robust process for raising sales invoices to make sure they are raised correctly the first time with all the relevant information to prevent any delays in payment from your client
#7 The invoice is in dispute
This can be difficult to deal with when the invoice is already overdue so it is vital that this is monitored beforehand. Communication is key here.
Any issues with delivery should be flagged up immediately by the Account Managers and in an ideal world, they should be sorted before the invoice is due.
If this isn’t possible then it needs to be discussed with the relevant team members whether any amendments to the invoice need to be made to prevent you chasing payments for work your client isn’t happy with. If you disagree with their dispute then it is essential you have a thorough contract in the first place that you can refer to.
Simply dropping them a line a week or two before the invoice is due saying ‘Any issues with this invoice getting paid on time?” is a golden opportunity for them to raise any disputes BEFORE it is due, giving you time to make amendments to get that invoice paid on time.
#8 Their accounts team are unavailable
When making calls on behalf of my clients I often get told the person that deals with this are not available. This can be a big waste of your time and can further delay getting that payment in.
When on this phone call, a good response is to ask if there is anyone else you can speak to regarding this matter along with ensuring that your initial contact is the correct person if you were to call at a later date.
If there is no one available, make a note of when the best time to call back would be and write a follow-up email to your contact so they are aware that you have called.
Again, consistency is the key, if you always call back when you say you will they will get fed up of you and are more likely to pay you so you stop bothering them.
#9 “This invoice has already been paid”
This response would require you to check back through your books and make sure that the previous payments have been allocated to the correct invoices. If they have been reconciled incorrectly then it may have been paid and you will have to allocate the payment to the correct invoice.
If all seems well in the books then double check your bank to see if it hasn’t come in with a strange reference or a different amount. If you are confident they haven’t paid then you could request ‘proof of payment’ usually in the form of a payment/account summary from their bank.
#10 There has been no response at all
This can be difficult to handle if there has been no contact received from your customer. The best method to retrieve this payment would be to follow the whole process.
This starts with automated email reminders to your client so that they can see exactly how overdue the invoice is. You would then need to make calls and then if there has been no response, send a follow-up email to show you have tried to get in contact with them.
You would then need to threaten legal action, starting with sending a Letter Before Action and if this does not help, submitting an Online Claim.
#11 Your customer has gone into Liquidation.
Within these situations, this can be very difficult to receive any money that you are owed. The first step would be to find out the firm of insolvency practitioners who are dealing with the admin of the case.
You will then need to contact them immediately and submit a claim. The next step would be to provide the firm with any evidence you have that supports your case. This would include any signed or accepted terms and conditions that the company going through liquidation has agreed to.
Without these documents, you will have very slim chances of your claim being successful. However, if their business has just ceased trading, you will need to make an informed decision on whether or not pursuing the debt through an online claim would be worthwhile.
What Next?
The most important outcome is to fully understand the real reason your invoices are not being paid. This way, you can resolve issues before they become a problem. We hope you are able to implement a couple of suggestions to help you get paid on time.
Look out for our future blogs on Credit Control where we will go into some of the above elements in more detail.
For more information on MAP’s Credit Control service, you can read more in our Data Collection brochure.
