4 Tips When Collecting Past Due Payments

The topic of unpaid invoices is never an enjoyable one. What do you do when a client isn’t paying what he owes? Without losing your patience and professionalism, here are a few tips that work well.

1. Be friendly- You don’t want to unnecessarily burn any bridges between you and a client, so take the time to discuss current options. Even if you chose not to do business with them in the future, it is always better to take the high road, keep your cool, and try to work things out personally and rationally. You may re-send invoices and reminders, stop by a client’s office, and ask how you might be able to resolve the issue. Sometimes, you may get them to agree to a settlement; it may not be the full amount they owe, but even 60-70% is better than 0. You may also be able to work out a payment plan or an arrangement that both parties can accept. If you chose to do business with them in the future, a retainer or up-front payment can reasonably be requested.

2- Check records- Before you start demanding money, it is good to get into the habit of checking your records. Your client may have already made a payment that was not properly documented (I speak from experience). Oftentimes, clients feel that your end of a contract was not upheld so they do not feel that they should have to pay you (yes, this has happened to me too). However, I keep very accurate records of the work that I complete and I compare it with the contract or agreement we both signed, so that there is no confusion. When you can approach a client with records of work you completed, they cannot dismiss you, making it a little easier for a client to see that they should pay you what they owe- business karma can be a you-know-what.

3. Work up chain of command– If the invoice is correct and your contact person is vague about when you can expect payment, you might need to start working up the chain of command. The higher up you go and the more authority that person has in the business, the more important it might be for them to protect their company’s reputation. In fact, sometimes, a person higher in authority will immediately recognize that action needs to be taken and will bypass the “middle man” who may be dragging their heels a little bit. It might be as simple as asking the right person. Not only can you resolve the current problem, you might even be able to negotiate faster payment terms for future invoices if you chose to continue doing business with them.

4- Hire a collection agency or lawyer- This is no fun for either party, so avoid this measure for as long as you can. I have waited 6 months before doing anything about an unpaid invoice. Collection agencies are scary enough to businesses that even a threat may push them into writing a check. Plus, we all hate annoying collections calls, so people tend to avoid having to deal with them at any cost. Their services range in price, but are usually affordable, especially if an unpaid invoice is over $500. This is a much better alternative than hiring a lawyer, who can charge several hundred an hour for services. Some very large debts may require this, though I have never had to go this far.

 We would like to hear from you? Have you had to collect money from a client? What worked? What didn’t? Leave us a comment or shoot us an email at info@journeybookkeeping.com. 


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s