How to Handle Aging Invoices

June, 12 2016

So you have a longtime client, who has always paid his invoices on time, but recently you’ve noticed unpaid invoices piling up. Do you have a brand new client, who has been diligently using your services, but now she stopped not only using your services, but stopped making payments too? Do any of these scenarios sound familiar? Do you have clients whose invoices are aging? What should you do?

5 ways to get your clients to pay up and avoid past due payments.

Having a stack of unpaid invoices is a huge problem I see many of my clients struggling with. As an accountant with a bookkeeping business, I know one of the biggest problems out there is a lack of cash flow and aging invoices are the biggest cause of that problem. This week, I wanted to address this issue. Here are some ideas on how to get your clients to pay up and how to avoid past due payments:

  • MANAGE YOUR ACCOUNTS RECEIVABLE MORE CLOSELY – Hyper vigilance is a good idea when it comes to invoicing and that’s why managing your accounts receivable is a must. If you invoice a client on Monday, your business or office manager needs to follow up on Wednesday. If you haven’t heard back from the client by the end of the week, you may need to e-mail, call the client yourself or have your office manager do it from your computer.
  • MAKE SURE YOU HAVE A PAYMENT FOLLOW UP PROCEDURE – The last thing any business owner wants is to have to call a client about payment. If you have a number of unpaid invoices, then make sure you have a payment collection plan in place. Follow up via email, then as we mentioned above, follow up by phone. If your client still hasn’t paid, then you should either consider hiring a debt collection agency or take the hit and move on. Remember to remain polite during any exchanges, so that the situation doesn’t get used against you when potential clients seek your services.
  • SET UP PAYMENT TERMS – Once you’ve collected on your debts, try to avoid aging invoices by having payment terms in place. Before you engage a new client, make sure he or she understands your payment expectations. Will payment be required to be made upon receipt of services or within a week of services rendered? Set your payment terms before you start any project. Make sure potential clients know that payments made after agreed upon terms, will be charged a late fee.
  • MAKE IT SIMPLE FOR PEOPLE TO PAY YOU – You should offer clients multiple ways to pay you. Credit card processing is a must. There are fees involved, but the fees are worth it if you get paid sooner. Another innovative method is to set up a pre-authorized payment or bank draft directly from your client’s bank account; this is called an ACH or Automated Clearing House. It basically is a written authorization from your customer to debit their bank account. Offering your clients more than one method of payment means you will get paid sooner and it’s a great way of avoiding aging invoices.
  • GET YOUR ENTIRE PAYMENT UP FRONT – Getting your entire payment up front may sound unrealistic, but many businesses are requiring it and clients are paying. Getting your payment up front means no more aging invoices and a cash flow infusion into your business. Make sure to set the terms of the transaction in writing and to always deliver all agreed upon products or services.

If you own a business, avoid aging invoices to keep your company’s cash flowing. I have helped a number of clients implement systems that make it faster for them to get paid. If you need help, call me or anyone on the Brigade Bookkeeping team. We are here to help you keep your books in order, and that includes getting paid for the work you do.