Unpaid invoices are all outstanding invoices of an organisation. They often represent the largest part of a company’s outstanding money. It is not unusual for 35% of all outstanding invoices to be overdue. This is not to say that liquidity improvement can be obtained mainly in this group. In addition, it is known that about 30% of all bankruptcies are solely due to a liquidity shortage. In this article we explain how you can solve the problem of unpaid invoices.
Dealing with outstanding payments
Dealing with overdue payments is often a difficult subject for many organisations. Contacting a customer about an outstanding invoice is gladly avoided, if possible. People do not want to be bothered, and maybe the invoice will be paid today. Nevertheless, it is wise to keep a tight rein on communication. After the payment term, the chance of payment decreases by about 1% per day. So you have to be quick. And customers appreciate a tight but neat follow up of the invoice process. It gives value to the service or product delivered.
How to get unpaid invoices paid
Three things are very important to get invoices paid faster. First of all, offering payment options. Ease of payment not only ensures faster payment of overdue invoices, but also of invoices that have not yet fallen due. Secondly, the collection process must be organised by means of smart reminders by email, post and SMS. And if payment is not forthcoming, starting a collection process will benefit the collection rate. And thus the cash flow. A cash collection software will help a company reduce unpaid invoices and have healthy debtor management. The final step is to forward the entire file to a bailiff, so that he can obtain a judgement through the courts. Thirdly, the communication platform for customers. This is often forgotten, but there really are many examples of customers who contact you about an invoice. And this is where a great opportunity for after-sales is missed by many organisations. A communication platform for you and your customers makes a big difference in customer retention. But also in faster payments.
Sending a payment reminder
When an invoice expires, it is best to send a reminder as soon as possible. Most organisations use email as a means of doing this. And that often works fine. But some customers are better off receiving a letter. Or an SMS as an extra means of communication. Payt debtor management software sends reminders automatically for its customers. This creates a consistent follow up.
What is striking is how quickly customers pay immediately after the first payment reminder. This proves that waiting for a payment is not wise, but also that automation is very clever.
Read more about when to send a payment reminder.
Overdue invoices legal action
If an invoice is still not paid after several reminders, you have two additional steps at your disposal. Firstly, an out-of-court collection procedure. There are collection companies that take this work off your hands. But we think that it is still better to keep this process in your own hands. We fully automate this process for you. The last step is a legal collection process. Here, you will be using a bailiff to take your case to court. The amount of the invoice determines which court your case must go to. After you have received a judgement, the bailiff will also try to collect the invoice amount. This process is sometimes even more difficult than obtaining a judgement. The bailiff will advise you where necessary about the follow-up actions and risks.
How to convince customer to make payment
Our figures clearly show that in most industries, offering a direct payment option has the most positive influence on the payment period. These can be credit card payment options or other payment options used. Secondly, a tight follow up process always results in a clear improvement. It is similar to education. But there is also the psychological aspect of someone being proud of what they have delivered. And therefore asks for the money to which he is entitled. And that is perfectly possible digitally and automatically. Finally, always give the debtor the option of simply sending a message. That solves many problems, so that payment can still go ahead.
Optimising your invoice collection process
Apart from the improvements mentioned above, many improvements are in the details. Like the tone of voice. Finding the balance between nice and strict makes a difference. But the outcome is not the same in every industry. So just test it. What means of communication are used? And when do you use which means of communication? Payt has extensive experience in setting up optimal processes. And where the process can be automated, we do that. This way, our customers have a lot of time left for the things that really deserve your attention. We would like every organisation to have the luxury of paying attention and optimising their processes.