Top five ways to chase unpaid invoices
Finding the balance between getting paid for your services while retaining customers can be tricky, and it’s up to small businesses to determine the best course of action.
By Luke Trickett
In an ideal world, invoices would be paid in full and on time every time. But unfortunately, any small business owner will tell you that chasing unpaid invoices has slowly become business as usual. Not only can this restrict a business’ cash flow, but it can also hurt the relationship an SMB has with its customers.
Finding the balance between getting paid for your services while retaining customers can be tricky, and it’s up to small businesses to determine the best course of action. A business can recover unpaid invoices in many ways, from sending overdue notices to providing a one-off incentive.
At Marmalade, we want to empower small businesses by giving them the tools and knowledge they need to make smarter business decisions, whether learning how to chase unpaid invoices or discovering growth opportunities. This blog will discuss how unpaid invoices impact SMBs and list our top five ways to chase late invoices.
The impact unpaid invoices have on small businesses
Dealing with unpaid invoices is one of the biggest challenges a small business encounters. According to Xero, approximately 53% of small business invoices are paid late in Australia, owed an average of $38,000 each.
Aside from the stress and time that comes with chasing unpaid invoices, many SMBs may also become unable to:
- Maintain healthy cash flow management
- Pay their suppliers and employees
- Keep up with day-to-day operational expenses
- Grow or unlock future opportunities
According to Xero, approximately 53% of small business invoices are paid late in Australia, owed an average of $38,000 each.
Now that we understand how unpaid invoices can impact a small business, let’s explore how you can ensure you get paid on-time.
1. Send an overdue invoice notice
For many SMBs, this is typically the first step when chasing late invoices. Think of it as a little push that gets your customer to pay up. It could also serve as a helpful reminder, as more often than not, they may have just forgotten!
Sending an overdue invoice is a quick and easy way to let your customer know their balance is overdue — an overdue invoice is the original invoice with ‘overdue’ stamped on it. Depending on your current method of communication, sending an email for unpaid invoices may have more of an impact than a physical copy.
2. Warn customers about late fees on invoices
No one wants to pay more than they need to, so warning your customers about being charged a late fee or adding interest to unpaid invoices on top of the outstanding balance may prompt them to get on top of the payment. Keep in mind that your late payment policy must be outlined to your client before they sign the contract. Put simply, you cannot demand extra money out of the blue.
If you issue a late fee on your invoice, state it clearly to ensure your message gets across. Many businesses may quote their late fees as a percentage, but your customer may appreciate a more straightforward approach. For instance, quoting the current balance and the new balance once the due date has passed.
3. Incentivise clients to pay missing invoices
If your business can afford to do so, consider incentivising a client to pay up. This could be receiving a small discount on their current or next invoice. While this isn’t an ideal solution, if you’re in a pinch and need access to cash, it can get you the funding you need more quickly.
Ensure you don’t make this a regular occurrence to prevent customers from becoming comfortable with this idea, as it could make you lose out on long-term profit.
4. Hire a debt collector
While debt collection for unpaid invoices isn’t a foreign concept and has been used for many years across different industries, it should still be used as a last resort as it can impact your customer relationships. Debt collection agencies are responsible for contacting and pursuing debtors, sending a letter of demand or taking court action.
Remember that these agencies typically take a large portion of the invoices they collect (generally around 25%), which could leave you out of pocket. It can also leave a bad taste in your client's mouth and may hamper future business dealings.
5. Consider technology enabled invoice payments
When chasing unpaid invoices, many SMBs have had to sell unpaid invoices to invoice financing lenders. While it can be a viable option, you may not be able to recover the full invoice amount until the customer pays the lender in full, slowing down your business’s cash flow and leaving you with potential fees you didn’t see coming.
Marmalade puts an end to the headache of chasing unpaid invoices by allowing SMBs to get paid instantly for invoices they issue, no matter the payment terms they offer customers. The unique and simple to use platform also provides automatic reconciliation for invoices and issues automatic customer payment reminders, saving you time and money from having to allocate additional resourcing.
A business can recover unpaid invoices in many ways, from sending overdue notices to providing a one-off incentive.
Marmalade — the hassle-free way to chase unpaid invoices
Unpaid invoices are, unfortunately, a common day-to-day occurrence, but with Marmalade, you’ll no longer have to worry about unpaid invoices. Marmalade helps SMBs access funds when needed without the hassle or extensive fees. As a Marmalade customer, you can also look forward to the following features:
- Zero interest, no credit checks or lock-in contracts
- No credit risk — Marmalade absorbs the risk of non-payment from customers
- No extensive paperwork or security is needed
- Clear visibility on the status of all invoices
- Seamless integration with your accounting platform
Say goodbye to missing invoices with Marmalade
From reducing invoicing errors to keeping your cash flow stable, Marmalade is a simple way to manage all invoice payment processes. We allow you to turn unpaid invoices into real capital, helping you keep funds moving through your business. Our easy-to-use platform helps businesses to reach their full potential, keeping them on track to meet their long-term goals.
Discover a better way to stay on top of your invoices by creating an account with Marmalade today.