What to do with unpaid invoices
Late or unpaid invoices can be disruptive to your small business. If you’re waiting to get paid, here are some things you can do to help.
Charge interest
The first step to avoiding unpaid invoices is to discourage them. Although you can’t add interest to an existing unpaid invoice, this is a tactic you can use in the future.
Make it clear on the invoice that you will charge interest for late payments and what amount it will be. A percentage of the total sum works well, and should encourage your customers to pay on time.
Know your customers
If you have customers who regularly pay late, you have a few choices. Either stop doing business with them, take measures to prevent late payment like adding fees and sending reminder emails before payment is due, or have a frank conversation with them about the issue.
Send a reminder
Sometimes unpaid invoices can be an honest mistake. Start by sending a polite reminder email to your customer including the original invoice. If you charge interest on late payments, make sure to send an updated invoice adding the interest amount to the total.
Follow up
If you aren’t getting a response, consider following up by phone. Although it’s a balancing act to keep a good relationship with your customers, you also deserve to get paid for the goods or service you have provided. Keep it polite and professional, but be firm that you need to get paid.
Offer partial payment
In some cases your customer can’t pay everything right away. You could consider offering partial payment or payment in installments for the amount. This should be negotiated with your customer, and make sure you have it in writing with due dates.
Decide how to proceed
If you still haven’t got your payment and are unable to make an agreement with your customer then you need to decide how to continue. You can hire an expert, take it to court, or in some cases complain to the Small Business Commissioner. How you proceed is your choice, and you can find out what’s best for your business.
Write off the invoice
If the invoice will not be paid, you can write it off. In your accounting, this is called settling an invoice and you record the invoice as bad debt. You also have the option to record part payment of the invoice in your accounting, and leave the invoice open to record more payments in future if you are doing it by instalments.
Manage your invoices online
Online invoicing software is a great way to create, send and track your invoices. If you choose accounting software with integrated invoicing, you can record the payments in your accounting in just a few clicks.
With Bokio accounting software, you can do your bookkeeping and invoicing in the same place. We have everything you need to help you prepare for your Self Assessment tax return, submit your VAT Return for Making Tax Digital and keep the right financial records. If you need an extra hand, we can help you find an accountant to work with.
Accounting is kept simple with Bokio, so you have more time to spend running your business.
