Managing Money: How to Make Your Unpaid Invoices Work for You

July 6, 2018

As a business, you are going to have invoices. Invoices are what go out to your customers that let them know what they need to pay for the service or product you provided for them. These are things that go out regularly as a part of your business procedures. So what happens when your business has invoices that go unpaid? These unpaid invoices can negatively affect your business and ultimately the amount of money that is coming in. There are options that you have for turning these unpaid invoices from negatives to positives.

Sending Nice Emails

The first strategy you can use is send your customers nice emails. You may want to start with this because it shows that you are a polite business person who is willing to be compassionate toward your customers and their situations.

The first step is to gather all the appropriate information. This should include having the invoice itself to check to make sure the information is correct on it. Also have all the correct dates that pertain to this account. These dates include when the service or product was given, when the invoice was sent, and when the due date was.

The second step is to decide when you will send this nice email reminding the customer that their invoice is overdue and unpaid. Some businesses wait two weeks after the due date and some wait only a week. There are even some business that send email notifications the day the invoice is due. Deciding when to send this nice reminder email is entirely up to you and should depend on how you want to run your business. This may require some trial and error on your part, but remember that you are always able to change your timeframe if necessary.

When you make first contact, remember to be professional. It will not help you or your business if you begin your first email on an aggressive tone. You want to include all the accurate information and it also helps to include a statement that nicely says when you expect the invoice to be paid. The second contact you make may be a week later or two weeks later. This again is up to you and what your plan is. Keep in mind that the longer this process stretches out, the less likely it will be that the customer will pay.

Using a Collections Agency

If you find that using the nice emails method to collect your unpaid invoices is not working out like you planned, then the next step for you may be to contact a collections agency. Knowing when to turn to a collections agency is tricky and entirely up to you, but it generally occurs after a period of 90 days. When you reach out to a collections agency, you are turning over your debt to the agency for a percentage of what is owed. Working with collections agencies does come with fees that you should be aware of before taking this route. The collections agencies will generally charge you a percentage of the amount of what they are able to recover. This percentage can be anywhere from 15% to 25% or even more. If the agency is not able to recover the full amount of what is owed by the customer then you could be receiving a very low amount back. However, what you do get paid back will still be more if the entire invoice remains unpaid.

Invoice Financing

The third option you have that might be the best for you and your business is by financing your invoices. The way that you finance an unpaid invoice is by selling it as an asset. When you sell it as an asset to a financing company, they will give you a discounted rate for it and in turn they collect the debt that is owed. Some invoice financing companies even provide insurance for payers that turn out to be bad.

When it comes to invoice financing, there are usually three options that you can choose from. The first option is for your business to choose one unpaid invoice or a batch of unpaid invoices that you would like taken care of. This may be the most cost effective option for you if you only have a few unpaid invoices that you need a cash flow from.

The second option is the partial ledger invoice financing, which will allow you to choose which accounts you needs cash flow from the most. These can be the invoices of large customers that owe the business a lot of money from the unpaid invoices. This way you have the choice of which invoices to leave out and which to include.

The last option is all of turnover invoice financing. This will allow your business to get the largest amount of cash flow as soon as possible because you are turning over the full value of all the invoices that are unpaid.

Each of these three invoice financing options have shown to be successful and it all depends on what your business needs are. With any of the options you choose, the process is the same. You will send a copy of your invoice to the invoice financing company, then you will get an agreed percentage amount back for the invoice. Once the invoice financing company gets the invoice paid, they will then send your business the amount less the fee. For more information on invoice financing, see www.invoicefinancingaustralia.com.au.

For your business to be able to collect from unpaid invoices, each of these options are viable. Where you are in the collection process will decide which route you take to get your invoices paid. All have their benefits and setbacks so the decision is all up to you and your business needs. If you have tried the emails, but do not want to use a collection agency then the next step for you could be to contact a n invoice financing company for a quick and easy solution.