If you want to improve your financial situation, the first step is to get on top of your cash flow.
And if you want to do that, you’re going to have to get on top of all your invoices, ensure that all invoices are paid on time and minimise the number of late or overdue invoices your business deals with.
Sending out reminders for overdue invoices can be awkward, we know. Unfortunately, it’s something that you’re just going to have to do if your business is to keep the lights on.
However, you shouldn’t let that stop you from getting what you’re owed!
This is especially important for freelancers and small businesses that might not be able to soak up the loss that comes with customers who don’t pay on time.
Fortunately, we’ve got a couple of tips to help you ask for overdue invoices.
So, how do you send an overdue invoice email?
Before the due date: how to avoid late payments altogether
Send early payment reminders
A lot of the time, an overdue invoice isn’t malicious – it can often be because the recipient has simply forgotten. We’re sure you’ve had moments where you’ve forgotten something like that!
Regular payment reminders in the lead up to your due date can help ensure that payments come in on time, and that you’re left with fewer late invoices.
Good times to send out reminders include:
- A week before
- The day before
- On the due date itself
Make it easier to pay
Sometimes, people look at your payment system and decide “that’s too much work for now, I’ll get around to it later”.
Only, instead of getting back to it, they let it slip through the cracks!
Not only will it reduce the amount of late invoices you get, but providing alternative ways to pay allows you to accommodate different clients – something that we’re sure your customers will appreciate.
Incentives for early payment
Obviously, not every business is going to be able to offer this.
If you can however, there’s no harm in allowing some sort of incentive, be it a small discount or preferable treatment for future orders.
How to ask for payment of overdue invoices
Despite your best efforts, sometimes invoices simply don’t get paid on time.
When this happens, it’s up to you to follow-up and ask for payment – and unfortunately, this is where a lot of small businesses stumble.
Many businesses rely on ongoing relationships, and worry that by requesting payment for overdue invoices, they’ll poison the well going forward.
Of course, the flip side is missing out on what you’re owed and having your cash flow affected!
So, how do you send an overdue invoice email?
Really, this should go without saying!
While it’s important to be firm, you also don’t want to alienate customers by coming off as too aggressive or blunt.
First off, it isn’t a good look if you come out swinging.
More importantly however, being polite can actually increase the odds of being paid. According to some, saying “please” and “thank you” can actually increase business and prompt action.
So it stands to reason it would have a similar impact on late invoices!
Timing is everything
You don’t want to flood a customer’s inbox with emails, even if you’re in the right.
When sending follow-ups, you’ll want to time things out so you aren’t too annoying, especially if it’s a new client or one that has a good record of paying on time.
Of course, that isn’t the only way timing comes into the picture.
If you’re going to send a follow-up, 12pm-3pm is a good time to schedule it. After all, what’s the first thing you do after grabbing a bite to eat? Checking your inbox to see what you missed while you were out!
Obviously, weekends are out. What you might not know is that Mondays are a bit of a danger zone for emails as well, since a lot of people are still in “weekend mode” and might not be paying full attention.
Include all invoice and payment details
Maybe the invoice has been lost. Perhaps the customer has a history of trying to dispute their payment terms. Whichever category your buyer falls into, it’s good practice to include all of the invoice details in your overdue invoice email, just in case.
Be sure to include:
- Invoice number and date
- Amount owed
- Payment terms such as late fees
- Reminders of previous letters
- Instructions for payment
- Your contact information
Or better yet, attach a copy of the invoice to your follow-up email!
Not only does this reduce arguments about what they owe you, but it also saves time by saving the payee from having to dive into their backlog of emails to find out how much they owe you.
Tailor the language
Somebody who’s only a day or two overdue is on a different level from somebody who’s a month late in their payments – as such, you’re going to need to change your tone depending on your “audience”.
If the client has a good record of paying on time, be polite – after all, there’s no need to cause unnecessary drama by coming out swinging.
If they have a history of late payments however or the delay is reaching unacceptable levels, you might need to take a firmer line.
Naturally, this will depend on the client, so you’ll need to use your judgement – whatever you do however, don’t just use the same boiler-plate reminder email if you can avoid it!
Offer payment plans
A late invoice doesn’t always mean malicious intent – sometimes, your customer may have fallen on hard times, and is legitimately struggling to make payments to you.
A little bit of flexibility can be an effective way of ensuring that you get what you’re owed.
If a customer makes out that they’re having cash flow problems of their own, figure something out. Whether it’s paying in instalments or offering a one-off extension, being flexible can be a huge help in getting the money you’re owed.
Not only that, but it’s great from a customer service standpoint as well – we’re sure your customers will appreciate your understanding!
Don’t rely solely on email
We get it: phoning someone about money can be awkward.
When emails don’t get the trick done however, oftentimes a phone call is the best way to get a result.
Because if it’s awkward for you, then it’s especially awkward for the recipient!
By calling, you’re essentially putting them on the spot – there’s no way for them to dodge around the issue, nor is there any change of your message being lost.
When following invoices up by phone, start by identifying yourself and explaining calmly and politely that you’re following up, as well as how many times you’ve tried getting in touch via email about a late payment
If possible, try to secure payment over the phone by credit card or direct transfer, or a firm commitment on the date and method of payment.
Small business accountants in Melbourne help you stay on top of your finances
Maintaining good cash flow is the key to improving your financial situation. And one part of that is ensuring that you don’t have any overdue invoices negatively affecting your cash flow.
If you’re struggling to collect on overdue invoices – or worse, you’ve got some overdue payments of your own – our accounting team can help.
Of course, that’s just one part of looking after your business’ finances!
It’s a lot of work, and there’s no shame in asking for help from a professional if you feel overwhelmed.
Ever since 1966, our business accountants in Melbourne specialise in helping small businesses with their accounting, providing a wide range of different accounting services.
And you can be one of them – all you need to do is get in touch.
Contact our small business accounting specialists today – call our team on (03) 9589 5488, or click here to request an appointment online.