Chasing up invoice payments can feel daunting, especially during the tough economic times we're experiencing now. 

Asking people for money – even if it's money they rightly owe you – is never a nice feeling. However, we've found that a blend of empathy, flexibility and clear communication can make a significant difference in turning unpaid invoices into cash in your bank account.

Here, we'll explore some effective strategies to help you manage and chase up invoice payments, ensuring your business remains financially healthy.

Communication is key

Effective communication is the cornerstone of successful invoice collection. Personalising your communication to each customer's situation rather than sending generic emails can show that you value their business and understand their challenges. This approach not only helps in building stronger relationships but also makes customers more likely to respond positively to your payment requests.

When contacting customers, address them by name and reference their specific situation or recent transactions. This personal touch shows that you’re attentive and considerate of their circumstances. Highlighting the importance of their business can foster goodwill and encourage payments.

Also, you don’t need to wait until an invoice is overdue to start the conversation. Reach out to customers before the payment due date as a friendly reminder. This proactive approach can help you stay on top of cash flow and alert you early to any potential issues. For example, sending a reminder a few days before the due date can prompt customers to prioritise your invoice.

Offer flexible payment options

Despite their best efforts, some customers may still struggle to pay their invoices in full. Offering flexible payment options can make it easier for them to settle their accounts, ensuring you receive at least partial payments regularly.

Therefore, consider breaking down invoices into multiple payments over a longer timeframe. This approach can make large invoices more manageable for customers and increase the likelihood of getting paid. Clearly outline the terms of the payment plan to avoid any confusion.

Setting up a credit card facility provides customers with an additional payment method, making it easier for them to pay you. If your accounting software doesn’t support this feature, we can help you set it up. The convenience of credit card payments can often speed up the payment process.

Offering a small discount for early payment can also incentivise customers to settle their invoices sooner. For example, a 2% discount for payments made within 10 days can be an attractive proposition for customers, helping you improve cash flow.

Monitor total outstanding balances

Keeping a close eye on how much your customers owe is essential. While it’s important to maintain positive customer relationships by extending credit, you also need to manage your risk effectively.

Regularly review your accounts receivable to identify customers who are consistently late with payments. This review can help you decide whether to adjust their payment terms or limit further credit until outstanding balances are settled. Importantly, ensure that your payment terms are clearly stated on every invoice. Highlighting the due date and any late fees can encourage prompt payment. If customers understand the consequences of late payments, they may be more motivated to pay on time.

Empathy and understanding

When customers are going through a difficult time, showing empathy and understanding toward them can go a long way. A considerate approach can help maintain strong relationships and encourage them to communicate honestly about their financial challenges. So encourage customers to reach out if they’re experiencing financial difficulties. By understanding their situation, you can work together to find a solution that benefits both of you. Your willingness to work with customers during tough times can build loyalty and lead to more timely payments in the future.

Seeking professional help

If managing invoice payments becomes overwhelming, consider seeking professional help. As accountants, we can provide valuable insights and assistance in streamlining your accounts receivable processes.

Modern accounting software can automate many aspects of invoice management, from sending reminders to tracking payments. Investing in the right tools can save you time and reduce the stress of manual tracking.

So, if you have any questions or would like assistance with implementing these strategies, feel free to get in touch with us on 01904 787 973 or book a discovery call with Donald Inglis.