Invoices don't always get paid as quickly as we'd like. Whether you're a small or medium-sized business, outstanding invoices can be an administrative burden and impact your cash flow.
Managing outstanding invoices is part of the credit control (or accounts receivables) process – and it's important to know how to optimize this process for best results. In this blog post, we will give you eight actionable tips that will help improve payment rates on outstanding invoices and reduce bad debt for QuickBooks users.
1. Have an effective credit control policy in place
The first step in making sure you get paid in full and on time is to have a clear and established credit control policy in place. This should include some key components:
- What your company's exact payment terms are.
- How long it is reasonable to wait for payment.
- Which customers need reminding first.
- How often they need to be chased.
Writing a credit control policy will help you understand the credit control process better as well as ensure that your business follows standard procedures when dealing with outstanding invoices. It's important to make sure everyone in your company knows about this document and can refer back to it if necessary.
It'll also help you identify any issues early on - such as internal mistakes or delayed payments from suppliers – many of which may lead directly to bad debt further down the line. With this information to hand, you can adjust your processes accordingly, preventing these mistakes from happening in the future.
So, how do you go about writing this document?
The good news is that we've already done a deep dive into how to write your credit control policy and our credit control experts have produced a template for you to follow.
2. Clearly state your payment terms upfront
Ideally, you'll want to be on the same page as your customer when it comes to payment terms, which means you need to make sure yours are clear and that your customer agrees to them during the onboarding process.
If you're unable to get a commitment from your customer in writing, make sure that the terms are stated on all purchase orders and contracts.
In many cases, the best method of ensuring they know how it works is by including payment terms within invoices themselves. This means there's no room for confusion when both parties receive an invoice with outstanding balances due - something which must happen before any further work can be done or goods delivered.
It also helps if this information appears underneath each outstanding balance down at the bottom of every statement so that customers have no reason not to notice them.
3. Set clear credit limits
Unsurprisingly, clear credit limits are a foundation part of the kind of effective credit control policy that gets you paid on time.
Setting credit limits means that you won't be caught off-guard when invoices remain outstanding or end up working with customers who are simply unable to pay.
And just as importantly, credit limits should also avoid the risk of outstanding balances becoming too high and unprofitable for your business.
The best way to set clear credit limits is by first establishing a realistic idea about how much money each customer has available within their own accounts payable (or AP) process.
This can then be used as a basis for setting an appropriate balance limit. It's generally easier if this takes place on individual invoice levels rather than across entire client portfolios, especially where different clients have very different payment behaviors.
It isn't always the case that outstanding invoice amounts can be put down to slow payment. Unfortunately, many businesses experience delays in payments due to manufacturing and shipping times, or because they are having issues with outstanding invoices, something which is out of their control.
Setting credit limits might sound daunting, but we've written out a clear guide to help you put them in place.
4. Offer flexible payment options
The best way to get your invoices paid is to offer the widest possible amount of payment options. If your customers fall behind, then offering flexible payment arrangements will allow them to pay down their outstanding balance in reasonable amounts over an actionable period of time, without impacting your business relationship.
Just remember to keep track of them in a spreadsheet or by using a tool like Chaser to offer payment plans.
Chaser's Payment Portal, for example, offers a personalized portal to customers with multiple payment options in one place, letting your customers pay through multiple payment platforms as well as traditional credit and debit card options. Best of all it integrates seamlessly with Quickbooks!
5. Be proactive in your payment chasing
Passively waiting is almost never the best way to get an outstanding invoice paid. You need to be proactive and strong in your credit control efforts.
Once you've sent your QuickBooks invoice, the first thing you need to do is follow up with an email to make sure that your client has received it. Once they've confirmed that they have, it's a good idea to ask if they anticipate any delays in getting that invoice actioned.
Hopefully, being proactive at this point will spur them into prompt payment. However, if the invoice does become overdue, you'll need to step up your reminders, sending them on a regular schedule.
Here's what we suggest:
- 1 day overdue - Invoice overdue, penalty reminder.
- 7 days overdue - Invoice overdue, penalty notice deadline set.
- 14 days overdue - Penalty notice issued, court proceedings raised.
- 21 days overdue - Court order deadline set for 7 days.
- 28 days overdue - Court order drafted and submitted.
Need payment reminder email templates? Try these 4 polite payment reminder email templates written by Chaser’s accounts receivables experts.
If you are going to impose late payment fees on your invoices, such as charging interest on overdue amounts, remember to have them clearly stated in your payment terms.
Sending repeated emails can take up a lot of time that could be spent growing your business, so it might be a good idea to invest in an automated credit control platform that does the work for you.
6. Run credit checks as part of your standard process
Prevention should always be your first line of defense when it comes to unpaid invoices and, as we've discussed before, credit checking your customers is a vital part of that process.
Credit checking potential customers during the onboarding process will help you avoid situations where you offer credit terms to businesses who are unable to abide by those terms.
Credit checking your customers on a regular basis is also important - it's worth remembering that outstanding invoices are often the result of an underlying problem with how creditworthy they are, so paying attention to changes in their financial situation can be extremely helpful.
7. Don't be afraid to pick up the phone
As effective as properly scheduled email reminders are, sometimes you're going to need to pick up the phone.
It's far easier to ignore an email than it is to put the phone down on someone and sometimes honest and open communication is the best way to resolve issues like late payment.
If you're struggling with what to say during such a call, we do have some effective phone call scripts you can use.
Remember that it's always worth following up a phone call with an email, just to cement what you've just talked about with the customer and so you have a written record.
If you don't have time to ring around your customer to get your invoice paid, or you'd just rather not have that kind of conversation, you can always outsource your credit control to a team of professionals.
For added ease, make sure they are a supplier that works with QuickBooks users like Chaser.
8. Always remain polite and professional
Late invoices put pressure on you and your business, so it can be hard not to take not getting paid personally. When you feel like your blood pressure is rising, remember to stay calm. Chasing outstanding invoices can be frustrating, but it's important not to let this frustration boil over into the conversation with customers.
Your customer might be struggling with their own finances for reasons beyond their control, or it might simply be an honest mistake.
Remain polite throughout all correspondence with customers to avoid damaging relationships that could come back to bite you later down the line.
Going in all guns blazing is a great way to put your customer on the defensive, reducing the chances of resolving the issue and removing the chance of you getting any repeat business in the future.
Polite and persistent is always the better option, as you can see from our 4 most effective payment reminder email templates.
QuickBooks and Chaser: a match made in accounts receivables heaven
By integrating QuickBooks and Chaser, you can easily chase outstanding invoices and recover debts from customers with outstanding balances.
Chaser's market-leading automation means less time spent chasing invoices and more time spent growing your business, while our schedulable reminders can get businesses like yours paid 54 days faster and save you 15 or more hours per week.
You can try the Chaser integration for QuickBooks for 14 days, totally free, with no card details required, to make sure it's right for you.
Check out Chaser on the QuickBooks marketplace to revolutionize your approach to credit control!
