You’ve finished the work. You did a great job, and you sent the invoice. But that was six weeks ago, and there’s no sign of payment.
For a lot of people, you won’t really want to chase the invoice up. It’s just…awkward. But you know you have to. So how do you go about it?
This is everything you need to know about navigating late invoices, including how to send tactful reminders and even how to avoid them in the first place.
Be confident but polite when chasing late invoices. Attach the invoice for their reference. Make sure you have good systems set up before you send the invoice to reduce the chances of a late payment in the first place.
Quite simply, a late invoice payment is one that isn’t in your bank account by the due date stipulated on the invoice.
If it was due on the 20th of March, your customer/client should have paid it so you have the money on that date.
An outstanding invoice is one that hasn’t been paid yet. It doesn’t necessarily mean it’s late.
Late fees on invoices can be an effective deterrent that get invoices paid on time. However, it’s not as simple as just charging customers an extra 10% when you decide it’s warranted.
In order to charge late fees, your customer needs to know they apply. This means including them in your invoicing terms in advance. Invoice late fee wording should make clear exactly how much the late fee will be and when it’ll apply.
For example, “A late payment fee of 10% the value of the invoice immediately applies if payment hasn’t been made by the due date of the invoice.”
If you don’t have a written contract, it’s enough to have told the customer verbally. In saying that, having them in writing makes it easier to refer back to them if there’s any dispute, so it is recommended.
You can also outline late fees in the invoice itself, by showing the amount that’s payable with and without late fees included.
The art of chasing payment involves taking steps to encourage prompt payment both before and after the due date.
1- Set clear terms
On your invoice itself, make it obvious when it’s due. One of the main causes of overdue invoices is customers simply not realising they were supposed to have paid it by a certain date.
Having clear terms also includes outlining your policy on invoice late fees.
Read more: What are the normal payment terms when paying an invoice?
2- Invoice immediately
Many businesses invoice at the end of a month, or on a certain date. This hurts cash flow because jobs that have been completed can go unrewarded for many weeks.
Invoicing as soon as a job is finished means you’ll be paid sooner. It also means the job is fresh in your customer’s mind.
3- Give payment options
Different customers have different preferences for making payments. By allowing them to choose from a range of options, you’ll make it more convenient for them. Pinch Payments is a great example of a popular payments provider.
4- Send a reminder
If an invoice hasn’t been paid a few days after the due date, it’s worth following up. You don’t have to wait until it’s two weeks overdue.
If you use invoicing software, you can set it up to automate reminders. This can take some of the awkwardness out of the situation, but it is less personal. Debtor Daddy is a service that makes it easier to collect payments specifically.
You can opt to send a manual reminder – see below for tips and email templates.
You might feel rude or awkward chasing up invoices. Many business owners do, but you shouldn’t. After all, you’re not the one who hasn’t paid your invoice, and you’re certainly not doing anything wrong by enquiring what’s going on.
There’s no hard and fast rule for when it’s appropriate to send an invoice reminder. You can send a reminder as soon as the day it’s due if you like – though be aware that your customer may have paid it that day and the funds just haven’t shown up yet.
A reminder email doesn’t need to be long. It’s about alerting your customer to the fact the invoice is late and reminding them how much they owe you.
The invoice late fee wording should be polite but deliberate. You want to maintain your relationship with the customer, but also make it clear that payment is due and should be made as soon as possible.
Here are a few tips for writing an invoice reminder email:
Attract the customer’s attention and let them know what the email is about at the first instance. There are a few different ways you can do this:
In the first instance, start by assuming the customer may not have received your invoice, or may not have seen it. This is often the case, and in these instances you don’t want to come across as accusatory.
You should also re-send the invoice as an attachment in case this has happened.
Reminding them of the due date illustrates clearly that it’s late. Letting them know how much is due makes it easy for them to pay the invoice there and then. Putting these details in bold helps to make this important information stand out.
Explain how the customer can pay the invoice. As above, ideally the customer will action your email and make payment straight away. This makes it important to include all the information they need to do that.
This step probably isn’t necessary for the first reminder, but if an invoice is still outstanding after some time, it can help to outline things like late fees. You may place their account in poor standing and refuse to offer further credit.
It’s not about taking these steps necessarily, but making the customer aware of the consequences of them not paying.
You may want to craft your own invoice reminder email, but if you’d rather use a template then read on!
Send: One week after invoice due date
Subject: Invoice #628
Hi [Customer name],
I hope you’re well. I’m just chasing up invoice #628, which was due to be paid a week ago. There’s no record of payment from what I can see – I know sometimes it can be easy to miss invoices so I’ve attached a copy for your reference.
The total outstanding is $375, which can be paid via direct debit or online transfer. Details are in the invoice.
Feel free to let me know if you have any questions.
If you still haven’t received payment, you can follow up with another reminder a week later.
Send: Two weeks after invoice due date
Subject: Invoice #628 is now two weeks overdue
Hi [Customer name],
I hope you’re well. I’m not sure if you’ve received by last email regarding invoice #628, but it’s now two weeks overdue.
If you can please make payment via direct debit or online transfer as soon as possible that would be much appreciated.
As per our payment terms, you’ll be charged a late fee of 2% per month for any amount that’s overdue 30 days after the due date. I’ve attached the invoice for your reference.
The unfortunate reality of doing business is you will encounter late invoices from time to time. It’s important to have an efficient, effective system that allows you to get these invoices paid while also maintaining positive customer relationships.
If getting your invoices paid quickly is important to you, you can also utilise FundTap for positive cash flow.
FundTap works by essentially buying your invoices off you. It pays you the full amount of the invoice within hours and when you receive payment for the invoice, it’s passed on to FundTap with a small fee attached.
FundTap links to your cloud accounting system, so it’s paperless, seamless and fully automated.
Get started with a free FundTap account, or book a live demo today.