How to Properly Chase Outstanding Invoices

Managing cash flow is fundamental for any business to operate smoothly and sustainably. When customers do not pay for goods or services on time, it creates outstanding invoices that can significantly impede a company’s financial health. Prompt and diligent collection efforts are therefore paramount to ensure a steady inflow of funds, allowing businesses to cover expenses, invest in growth, and maintain solvency. Addressing unpaid invoices efficiently helps prevent liquidity issues and contributes to overall financial stability.

Gathering Essential Information

Before initiating any contact regarding an overdue payment, compiling and verifying all relevant information is a crucial preparatory step. This foundational work ensures that all subsequent communications are accurate, professional, and well-informed.

Have complete invoice details readily accessible, including the invoice number, original date of issuance, exact amount due, and specified due date. Knowing the services rendered or products sold helps in addressing any disputes. Accurate client contact information, such as the full legal name, current phone numbers, email addresses, and mailing address, is vital for successful outreach.

Understanding the agreed-upon payment terms is essential, including “net days” (e.g., Net 30), late payment clauses, or discounts offered for early payment. Review any prior communication or agreements related to the invoice for context. Internal notes or customer relationship management (CRM) entries regarding the client’s payment history offer insights into past behaviors or potential issues.

Initial Communication Strategies

Once pertinent information has been gathered and verified, initiate polite and professional communication with the client. The goal is to remind them of the outstanding balance and ascertain any issues preventing payment. Several methods can be used for this initial outreach.

Email reminders are a common and efficient starting point, often sent before, on, or shortly after the invoice due date. These messages should maintain a polite and professional tone, clearly referencing the invoice number, amount due, and original due date. Offer assistance with any potential issues, such as providing a copy of the invoice or clarifying service details.

Following up with a phone call can be effective for direct dialogue and immediate clarification. A phone call also provides an opportunity to understand the reason for the delay. When making calls, a professional script helps ensure consistency and politeness, focusing on problem-solving. Physical letters, while slower, add a formal touch and serve as a documented record, especially if sent via certified mail. Initial communications typically begin a few days before the due date, followed by another on the due date, and then follow-ups within 15-30 days past due.

Advanced Collection Methods

If initial communications do not result in payment, escalate collection efforts using more structured and formal methods. This phase focuses on increasing the urgency of the payment request while maintaining a professional relationship.

Sending firmer, more formal reminders or demand letters is a common next step. These letters reiterate the outstanding balance, invoice number, and due date with a more direct tone. They may also include potential consequences for continued non-payment, such as late fees or interest charges. Such letters can specify a firm deadline for payment before further action is considered. These documents indicate the seriousness of the outstanding debt.

Offering structured payment plans or partial payment options can be a pragmatic approach, especially if a client is experiencing temporary financial difficulties. This demonstrates a willingness to work with the client to resolve the debt while securing a commitment for payment, often through regular, smaller installments over a defined period. If internal efforts continue to be unsuccessful, consider involving third-party collection agencies. These agencies specialize in debt recovery and apply persistent methods, often charging a percentage of the recovered amount. Engaging a third party is usually considered after an invoice has been outstanding for 60 to 90 days or more.

Maintaining Thorough Records

Throughout the process of chasing outstanding invoices, diligent record-keeping is important. Comprehensive documentation provides a clear, chronological history of all interactions and decisions regarding each outstanding debt. This practice supports continuity, aids in resolving disputes, and serves as a reference for future actions.

Record specific details for every communication. Include the exact date and time of contact, the method used (e.g., email, phone call, postal mail), and a concise summary of the discussion. Note any promises made by the client, such as an anticipated payment date or a commitment to resolve an issue. Document any agreed-upon actions or payment arrangements, like a payment plan.

These records can be maintained using various tools, from spreadsheets to customer relationship management (CRM) systems or specialized accounting software. Dedicated digital or physical folders for each client’s outstanding invoices ensure all related documents are centrally located. This meticulous record-keeping provides evidence in case of a dispute, ensures different team members can take over collection efforts, and informs future business decisions regarding client creditworthiness.