What is an invoice reminder?
Tips and tricks for being more effective with debtor management
An invoice reminder, or payment reminder, is sent out to a debtor to remind him to pay an invoice. There are three types of invoice reminders.
The first is sent to customers to remind them of an upcoming invoice. Most of the time this is a yearly direct debit invoice. The purpose of this reminder is to increase the chances of collection. For example that there is enough money in the bank account to fulfil the collection. A cash collection software can make debtor management more effective and prevent invoices from passing their due date.
The second type of invoice reminder is a couple of days before an invoice’s due date. In some businesses this is considered rude. That is why an invoice reminder before its due date isn’t used very often. In other cases, when there are sanctions on late payments, it can be helpful to remind a debtor of an upcoming sanction.
The most common invoice reminder is sent when an invoice is past its due date. It is also called a friendly reminder. Most of the time there are no sanctions. It is just to remind a debtor of its obligation to pay an invoice.
How do you send an invoice reminder?
Today, most invoice reminders are sent via email. It is the cheapest and fastest way to reach out to somebody. A printed invoice reminder is still used too, although less and less. Sometimes it can be effective in combination with an email.
A widely used method of reminding a debtor of an overdue invoice is calling. This is the most expensive and time consuming method. It works though and it sometimes gets more insight in the debtors’ reason for not paying.
Another method is to send an invoice reminder via a text message or Whatsapp. It is not widely accepted but it is very effective. Tests have shown that a text message is as effective as a personal call in terms of payment percentage. The advantages of a text message are of course that it is cheap and not time consuming.
How many invoice reminders does one send?
In most countries and industries three invoice reminders are considered the standard. Before starting a debt collection with added recovery costs. But worldwide there are few laws about this. To protect consumers especially, most countries have a law that obliges a company to send at least a final reminder which sums up the consequences of not paying within a certain period of time.
Read more about when to send a payment reminder.
How can I be more effective when it comes to invoice reminders?
Every country and every industry has its own set of customs about how to organise invoice reminders. But there are certain tips and tricks for debtor management that apply in most countries and industries.
Being personal instead of being formal pays off “Hi Jason” pays better than “dear mister Smith”. It might not fit your company rules, but reconsider it for better cash flow.
Automate your debtor management. There is no competing against consistency in your invoice reminders. A manual debtor management process will never be as successful as an automated one. Not the least because of the time you save for specific cases that need to be investigated. This way, time will go to the cases that deserve attention.
Be prepared to start an amicable collection process. Invoice reminders are way more successful when you are prepared to start a debt collection with added recovery costs. Even though you will almost never have to start a debt collection.
If you feel the relationship with your customer is at stake if you start a debt collection. Remember, there is no relationship when you deliver a product or service and your debtor doesn’t pay your invoice. People pay better to equals than to subordinates.
Sending payment possibilities with your invoice reminder works great. Consider adding payment possibilities like PayPal or CreditCard. They might be expensive, but they increase your cash flow for sure.
If you would like to use this feature, use them also on your invoice. Debtors will otherwise start paying late when their preferred payment method is available only from the first reminder.
Enjoyed reading this wiki?
Go on, give it a share on social media and spread the knowledge.