How to Deal With Unpaid Customer Invoices & Save Your Cashflow

Unpaid Invoices

How to Prevent Unpaid Invoices

Getting a Business Loan to Cover Unpaid Invoices

Summary

As a small business owner, unpaid invoices can be a frustrating and demoralising problem. Not receiving payment for the services that you've provided can cause issues such as immediate cash flow problems and customer retention difficulties, which in turn hinder long-term growth. You may trust your customers to respect you and pay their invoices on time - but this is not guaranteed. Fortunately, there are a few strategies you can employ to ensure that your customers pay their invoices on time and in full.

If you're constantly waiting on unpaid customer invoices, it can drastically impact your cash flow and business growth.

Cash flow is essential for any business, and delays in payment can put a huge strain on a company's ability to stay afloat. Additionally, businesses rely on customer payments in order to grow. Without a steady income, it's difficult for small businesses to keep up with market demands or invest in new projects. Unpaid invoices can also create unwanted tension between businesses and customers, leading to customer retention difficulties and further financial stress.

How to Prevent Unpaid Invoices

Implement a payment policy

The first step to preventing unpaid invoices is to have a clearly defined and detailed payment policy. An agreed-upon, transparent payment schedule should communicate when payments are due. That way, both parties are aware of their responsibilities regarding the invoice. 

The payment policy should also clearly outline the consequences of late payments. By setting clear expectations ahead of time and getting them in writing, customers will be more likely to pay their invoices on time.

Implementing a payment policy is the best way to ensure customer invoices are paid on time.

Double-check

Always double-check that you're sending invoices in a timely and accurate manner, with the correct details. The last thing you want is to pester a customer for a late payment and realise you sent the wrong invoice or never sent one at all.

Using an automated invoicing system can help streamline the process and ensure that there are no mistakes. Automated invoicing also allows you to easily send follow-up emails or reminders about overdue invoices.

Take action

You should take prompt action once you realise the invoice is overdue. The first step is to attempt to contact the customer. A polite phone call or email can often remind them to pay the invoice or inform them that their account is overdue. If that doesn't work, then you may have to take further action.

In the meantime, it's best to withhold the product or service you're offering until the customer makes the payment - if possible.

Payment plan

Sometimes customers are legitimately unable to pay the invoice due to poor cash flow or unexpected financial circumstances. In these situations, it's important to be understanding and attempt to come up with a mutually beneficial payment plan. A payment plan allows the customer to pay off their debt gradually and can work as a way to retain them as a customer and protect your cash flow.

Whilst it's not ideal, if a customer cannot pay the invoice, you should try to be understanding and not take drastic action straight away.

Last resort

Another possible course of action is to contact a debt collection agency. While this should always be a last resort, it can be an effective way to ensure that your customers pay their invoices in full and on time. Depending on the size of the invoice, you may be able to recover the funds through small claims court. 

Getting a Business Loan to Cover Unpaid Invoices

For example, you may get the opportunity to work with a big customer that will create big profits for the business - but they request longer repayment terms than you had planned or are used to. In this instance, it would be beneficial to accept their request, but you may need some financial aid to bridge the gap between payments.  

If the invoices accumulate over a long period of time, and the business can not wait any longer for the money, a business loan can enable the business to pay its bills and keep operations running. It is also possible to get a loan to settle past-due invoices with customers. This can help to make customer relations smoother, as well as prevent the customer from taking legal action. 

A business loan can help repair any cash flow issues while you are waiting on customers to pay their invoices.

If you are waiting on customers to pay invoices and find it's affecting your cash flow, or you have another payment commitment, enquire with Love Finance. Our enquiry process is simple, and funds can be released into your account within a matter of hours, so you can get the cash you need without stressing about when your customers will pay.

Summary

Unpaid invoices can be a real problem, especially for small businesses whose profits can easily be impacted by slow-paying customers. By having a clearly defined payment policy and taking action when payment is overdue, you can ensure that your invoices are paid on time and in full, without too much detriment to your business or customer.