Struggling with Past Due Invoices?

If you’re looking for answers to any of these questions below you will find this article helpful.

  • What is the past due invoice?
  • How to make past due invoices
  • How to collect past due invoices
  • How to write a past due letter
  • How to collect past due invoices
  • How to calculate finance charges on past due invoices
  • Are unpaid invoices tax-deductable and can be written off?
Collecting Unpaid Invoices the Easy Way

Invoices…

Yeah, we felt you shudder and we get it. But, let’s talk about it for a second. 

Most business owners hate the invoicing process. It’s time-consuming and frustrating. This is magnified when you aren’t paid on time. If you’re a team of one, it’s not a task you can delegate. 

Really, it’s frustrating from the start. First, you create an invoice, typically in a Google Doc, save it as a PDF file and send it to your client.

Next, you wait…

*Crickets.* 

Truthfully, you’re not even sure they received it. 

A week or two goes by and you forget to follow up because you’re working on other projects. 

If any of this sounds familiar, we hear you. We’ve been there. It can be detrimental to your work when you are struggling to get paid.

Resolving these issues starts with a good invoicing process. Having a plan in place will reduce the number of unpaid invoices on your books. 

You don’t want to be caught flat-footed. The last thing you want to be thinking about at night is if your client will pay you on time. 

We’re here to guide you, from creating an invoice to managing a client who refuses to pay. So many freelancers dread the billing process. It does not have to be something that causes you to sweat at the end of the month. 

You’ve worked hard and billing for all those hours is your reward. If you can become a well-oiled invoicing machine, you can unlock potential in your business and reduce the amount of time you spend trying to get paid.  

Being paid on time is the lifeblood of any business

Trust me, I know the pains of creating my own invoices. 

In the early days of my freelancing business, I didn’t even use invoices. My “invoice” was typically an email exchange that included a price; no agreement or formal documentation. A pretty risky way to do business when I look back on it. 

Beyond not having an invoicing process, I had no consistent method of accepting payments.

I took Venmo, Cash App, or whatever a client wanted to use. None of them were effective or particularly good for business purposes. And I didn’t feel professional using them. 

My business grew and as I landed other clients I started receiving emails saying “just send an invoice for this month.” 

Uh-oh. 

I literally started Googling “what to put on an invoice.” I had no idea what I was doing. And I definitely hadn’t thought about what to do with an unpaid invoice. 

So I fumbled my way through Google Docs and put most of the necessary information on my invoices. They weren’t pretty but, they did the job. 

It took a long time to create. I was drawing tables, formatting text, making sure everything looked professional. Starting out with a new business, I didn’t want customers to see me as a rookie (fake it till you make it, am I right?). 

There was no, “payment due in 30 days” or anything like that. I simply hoped that a client would pay me on time. 

I never considered how to handle a past due invoice. Or what to do if someone didn’t pay for an extended period of time. I had no idea how outstanding invoices could impact my business. 

I was standing on thin ice and didn’t even know it.  

When I made the switch and began using LessAccounting, one of the first things I noticed is how much time I saved. I could create and send three to four invoices in the same amount of time it took me to create one or two in Google Docs. I could send it directly from the platform and integrate my online payment system (I had moved up in the world and started using Stripe). 

Something that stressed me out when I was creating invoices from scratch was correctly listing a client’s contact information and address. 

In LessAccounting I can create a contact and can add it to an invoice using a drop-down box. It’s that simple. An invoice is ready to go in a few clicks of the mouse. 

My process has completely changed since I first began freelancing. Clients feel more confident in my services because the billing process is professional and efficient. And I can stay on top of my revenue by instantly viewing the clients who have paid me and those that are behind. 

Why a good invoicing process matters

You don’t think much about invoices until you need to send one. 

And let’s be honest, it’s not the most thrilling part of your job. 

So how in the world do you make one of these things? Well, you can scan the depths of the internet and find plenty of good examples. There are a few templates out there you can download and use. 

Google Docs is a go-to for many freelancers and business owners. It’s user friendly and easily shareable or downloadable. 

While Docs is a good tool, it’s not great. You may find a template that works, but otherwise, you’ll be doing all the formatting and creation yourself.

That takes time.

The time you could spend on your business.

Once you send a Doc invoice to someone there is no way to track it. It’s impossible to know if your client received the invoice, or if it landed in their spam folder. There is not an option to integrate payment tools like Stripe or PayPal, which means accepting credit card payments will take a few extra steps.  

You won’t be able to manage your unpaid invoices efficiently. You’re left to keep up with it on your own, reminding yourself to follow up. 

Following up is a key part of the process

When not using a good system there aren’t any notifications reminding you that your client hasn’t paid. No automatic past due invoice email notifying them they’re a week or two late.

You’re busy. You have other projects going on. But you need to be paid. Well, you aren’t a professional bill collector. So losing time chasing down an outstanding invoice is money lost on your other potential income. 

If you establish a good process upfront, this can minimize a lot of headaches down the road. Clients that don’t understand your payment process are likely to let it fall off of their radar. It leads to a past due invoice. Make it clear what the expectations are and how they can contact you with any questions.

Ensure that your invoice is filled out correctly and no blanks!

We know you’re not really going to leave your invoice blank. But, we do want to stress that you need to provide clear, concise information for your client. 

It may seem simple enough, but leaving off critical portions can impact your ability to be paid on time. Let’s go over a few things you should always include. These steps will reduce the chance of clients not paying. 

  • Your client’s basic info; name, business address, phone number, and email. Add your information so they can contact you if they have any questions.
  • Establish a billing point of contact. Your customer may want you to work directly with someone in their accounts payable department. 
  • Set a due date and include your payment terms. This may be seven days or thirty days, but be consistent and stick to this policy. It will dictate whether you’re paid on time and reinforce your efforts to collect money on an outstanding invoice. 
Don’t skimp on the details

Have you ever received a bill and it wasn’t really clear what you’re being charged for? This could be your client if you’re not careful with your invoice.

It’s unlikely you’re the only one charging them, so they may not remember every bit of work you’re doing.

Add notes and details about the project. These are good to keep on file and recap the scope of your work for this particular invoice. 

Don’t forget to list the amount of money a client owes you! Seems basic, but you’ll be surprised by what we’ve seen.

If there are multiple charges with this invoice, provide line items that break down what your client is paying. 

Tell your client how to pay. One of the best methods in preventing a past due invoice is making payment simple and easy. If you take checks, provide an address to which they can send the money. If you accept credit card payments, provide simple instructions on how they can pay online.

You won’t always be paid on time

Generally, email is the most common delivery method. But if you choose to send it via mail, consider sending it certified. That way you can track it’s delivery and know it made it to their mailbox. 

Here’s a scenario. 

You finish a project for your client. They love your work and send you a check immediately. They even pay you a little extra because you’re so awesome at what you do.

Oh, how sweet this sounds. You may have a few projects that go like this (and we hope you do!), but the reality is a little different. Most clients will pay you on time, but you’ll confront situations that require you to address a past due invoice. 

 There are a few different approaches you can take to prevent unpaid invoices.

Preventing unpaid invoices before they happen

The first step is to set clear payment expectations with your client. Tell them your terms, accepted methods of payment, and if you charge any penalties for late payment.

Shorten your payment terms. You’ll be paid faster and maintain a more consistent revenue stream instead of waiting till the end of the month for payment. It all depends on your business and the relationship you have with your clients. You’ll need to decide what’s best for you and your customers. 

Ask for money upfront. Taking a percentage (often 30%-50%) of the total fee before the project begins. This benefits you and your client. They’re inclined to stay engaged on the project and pay you in full because they’ve already invested their money. You’re motivated to get started because you’ve earned some income for the work and want to collect the remainder. It protects you from a total loss in the event a past due invoice is never paid. 

If you’re in a position to do so, think about offering a discount for a 100% upfront payment. The potential savings of 10-15%, for example, may entice some clients to go ahead and pay in full. Particularly for a newer customer, it can be a great option. 

You may be working on a long term or multiple projects with a client. If they refuse to pay, consider stopping your work. This is a very effective strategy, especially if your output is critical to your client’s operations. If you decide to stop working until you’re paid, clearly communicate this to your client. Keep it professional. Let them know that you’re glad to continue working, but until you’re paid what you are owed, you won’t be able to do so. 

Think about dropping your client a line, as the due date draws near. They may need a simple reminder (they’re busy people too) and will pay straight away. 

If you’re a freelancer or manage a small team and your client is a larger corporation,  explain important timely payments are for your company. You and your business need the cash flow to continue operating and delivering great work. 

What to do when the invoice is late?

Okay, so you officially have an unpaid invoice. Don’t panic. 

Late is different for each business. For you, it could be one day or one week. You may want to begin following up at 2 weeks late, or 30 days. Your next steps largely depend on the relationship you have with your client. 

For most situations, it’s good to start with a past due invoice email. Many times this is all it takes to get the process started. At this point, there’s no need to start sending aggressive collection style emails. There are a whole host of legitimate reasons why your client is late. 

Start by restating the due date, confirming that payment is late, and asking them if they received the invoice. If you’re unsure how to put this on paper, here’s a sample email for you: 

Dear —-,

I hope this note finds you well. I want to follow up on an invoice I emailed on April 1. I haven’t received the payment yet, so I wanted to ensure the email isn’t lost somewhere in the depths of cyberspace. Would you please check to see if the accounts payable department has received it? I’ll be happy to resend if necessary. Otherwise, I look forward to receiving payment within a week.

I really appreciate your help! Thanks!

Donnie Cooper
Inboundable Inc

This is a good email and here’s why.  

Donnie makes two great statements that prompt a response from his client. One, he checks to make sure they received the invoice. It could solve the issue immediately if it landed in a spam folder. Second, he establishes that payment is due within a week. It calls the customer to action and clearly states what they need to do and when. Again, make it as easy for them as possible. 

You’ve sent the first follow up email (using the great example above). Now your client is way behind on payment. Stay calm.

 Once they’ve hit “very late” status, you’ll need another past-due invoice email. This one should be a little stronger and includes consequences if action is not taken. Some brave souls may opt for a phone call instead of an email. 

In this message, provide a timeline of the delinquent payment, your contact information, and a means for them to pay immediately. If you charge any late fees, include those and the rate at which they will accrue. Requesting a call is a tactic you can use to encourage prompt action. Most people don’t get very excited to talk about their late bills on the phone. 

Here’s an example of a “very late” past due invoice email:

Dear —-,

I hope you have are enjoying a productive week.

Request: Payment or a phone call today to discuss payment options.

I noticed that your invoice is overdue by 25 days and wanted to reach out to make sure that you received our original invoice and my reminder email on 5/15.

I’m concerned that you may not be aware that your invoice is 25 days overdue to reach out to you immediately before a late fee of X% is added to your outstanding balance.

.. I have included it here just in case you hadn’t received it or misplaced.

Could you please reply to me via email or call me directly at 800-908-1568 by the end of the day and let me know you received this?

As a reminder we do take payment by CC, direct deposit or with a check.

If you have any questions or concerns regarding the service we provided on 5/1 or on your outstanding balance please call me personally so that I can make sure that you have an excellent experience with us.

As always we are grateful for your support and loyalty.

Warm Regards,

 

In this message, the timeline of communication is crystal clear. The sender states the number of days the invoice is overdue (25) and the dates in which they sent reminder emails to the client. 

They’ve attached the invoice in case the client has not received it. The conclusion of this email is what makes it work so well. They request an email or call acknowledgment that the customer received this message. 

Demand letters, collection agencies, and attorneys

Take a deep breath. 

“Demand letters” and “collection agencies” are words that can tie your stomach in knots from just hearing them. 

These are unpleasant terms, but what’s even worse is your business suffering because you’re not being paid on time. 

If you’ve reached a point in the past due invoice process that indicates you will not be paid anytime soon, or at all, you need to start moving toward legal consequences. 

Before you begin calling lawyers, try sending a demand letter. This notice will outline the timeline and facts of the situation. In short, demonstrating that you haven’t been paid and the actions you’ve taken so far to try and collect. 

Provide legal backup. This should refer them to your contract (which you can include when you send the demand letter). Point out your payment terms and policies and the potential penalty of non-payment. 

Even if you don’t have a contract, but you discussed terms of work in an email, this may suffice in court. Keep these conversations for your records in case you need them later in the process. 

Once you’ve provided the facts, let them know what the next steps are. Generally, this means taking legal action. Provide a timeline for them to pay before you move on to the attorneys. Try and be flexible by offering monthly payment options. 

Send your demand letter via certified mail and require a signature. Keep copies of your letter and any response you receive from the client. 

Here’s an example of a demand letter to get you started. 

Get Your Facts Straight Before You Send the Past Due Invoice Email

Before you send a nasty email open your calendar, get your copy of the invoice you sent, and get your facts straight. 

(Your LessAccounting invoice dashboard has all this information.)

Collecting Unpaid Invoices the Easy Way
Past Due Invoices Dashboard

 

Don’t embarrass yourself by jumping on a customer without knowing what you’re talking about.

  • The unpaid invoice was correct.
  • Do you know How to Make an Invoice?
  • You sent the invoice.
  • The invoice due date has passed.

Set aside the factors that are beyond your control. If the post office lost your invoice, or the customer’s spam filter ate your email, that’s not your fault. Stick with what you know and what you can control.

How long should I wait before I send the past due invoice letter?

Some businesses give a customer two weeks past the due date, while others give them one week. There are even those that contact the customer before the due date, just to remind them it’s close.

Make sure you’re sending invoices when they’re due and not waiting for weeks. Your procrastination will result in clients taking longer to pay. It also makes tracking simpler. If you’re letting invoices sit for a week or two, they can fall off your own radar. As a sole proprietor or small business owner, this type of mishap can severely impact your business.

Pick what you think is reasonable. Test it on your customers. Tweak it if necessary.

Act immediately if you aren’t paid.

It’s uncomfortable to talk about unpaid invoices with your client. No one likes to discuss money, especially with someone who owes you.

But, addressing it immediately will prevent so many problems from popping up later. A simple email is often enough to get a check on the way to you.

When you begin working with a new client, vet them properly, and ask for a deposit on your work.

If you’re spotting red flags with a prospect, it may not be worth working with them. If your billing process is reasonable, most clients will not object to your requests. They may negotiate or ask for some changes.

But, a potential customer that seems unwilling to pay a deposit, or asks for unpaid trials, is one to be treated with caution. 

If you bill hourly, consider billing in advance for the project. 

John Rampton, writing for Entrepreneur.com, recommends letting go of the stiff business approach. Write an email that speaks directly to the person.

Tell them that you’re disappointed in their delay in payment, especially since you’ve worked hard for them and been there as a partner. 

Most human beings hate the feeling of letting another person down. This form of communication can encourage action immediately. If you’re a valued and essential partner, they may become worried about losing your services. This mindset shift can lead to a change in their behavior.

Let's take a look at another example.

Dear —-,

We wanted to touch base with you about your account here with us. We hope that you are satisfied with the services that we’ve been providing over the last 4 months, and based on your feedback on our last phone call we’ve noted that you are satisfied based on the amount of return you’ve been getting on your investment with us.

As of last week, your account is past due. We are a small business and each payment is necessary to fuel our operations, which includes the in-house technicians that we pay to work on your campaign.

You can pay us by check, credit card, or PayPal.

If you have any questions, please let us know and we’d be happy to respond.

Thank you for your patronage.

Mr. Coombe reminds the customer of their past satisfaction with his service. He goes on to explain why payments are vital to a small business, and he gives the customer three options for payment. If you’ve had problems with a particular customer in the past, you may want to take a more direct tone.

LessAccounting makes invoicing easy!

You didn’t start your business because you’re passionate about invoicing and bookkeeping (that’s why we’re here!) 

You’re great at what you do and so are we. We can help you manage the invoicing process from start to finish.

This means you’ll have a helping hand when it’s time to deal with an outstanding invoice. 

No more creating your own invoices in Google Docs, or remembering to send a past due invoice email.

LessAccounting can take these tasks off of your plate. 

Our online platform makes invoice generation easy and sends follow up emails to your contacts when they miss a payment deadline.

Meaning you get paid faster and keep your business moving without losing time. 

When you’re not bogged down with administrative tasks like a past due invoices, you can use this time to create great work and land additional projects. 

Each time you log in you’ll be able to see which payments are on time and which are overdue. You’ll also have a clear line of sight into what your revenue stream looks like. This gives you a picture of how outstanding invoices are impacting your bottom line. You can make more accurate projections and forecasts. You can look for patterns with certain clients and determine if you need to adjust your invoicing process. 

No one wants to be in a position to bug people or ask for money. By following these steps and working with your client, you should be able to avoid the courtrooms and collection agencies. It’s important to approach each situation professionally. Coming after someone with demands of payment as a first step will likely lead to no progress. If it does, you may not retain that client for very long. 

When it comes to invoicing, you don’t have time to waste or worry about getting paid. From start to finish, building a process will help you eliminate outstanding invoices. And when you’re faced with a past due invoice, you’ll be better equipped to engage your client. 

Managing your own company is difficult. Whether you’re a solopreneur or leading a small team, there are many parts of your business that demand your time. Invoicing is one of the most important. Don’t take this on alone. Find a process and partner that can make your life easier.

All features, no credit card required. 

Related Post

Recent Posts

Collecting Unpaid Invoices the Easy Way
Collecting Unpaid Invoices the Easy Way

Recent Posts

Collecting Unpaid Invoices the Easy Way
Collecting Unpaid Invoices the Easy Way