avoid unpaid invoices

Follow These Tips to Collect Your Accounts Receivable

As a business owner, you depend on having your clients honor their obligations. What do you do, however, when you send out an invoice after completing work on a project, and find that the invoice goes unpaid?

Rather than worry about unpaid invoices when these problems occur, it can help to plan in advance, and avoid them altogether. Here are seven tips to help you avoid a situation where you’re left holding an unpaid invoice.

1. Perform background checks and credit checks.

When you perform a service for a client or sell them goods, you extend them credit. Banks always perform credit checks before they loan money to borrowers, and so should you. It’s important to run routine credit and background checks for credit scores, any history of bankruptcy, verification of identification, and a possible criminal record. Major companies such as Intuit and Experian perform such checks for small businesses.

2. Provide estimates before performing a service or selling goods.

It’s always a good idea to provide estimates and invoices to clients early on in a business relationship. The rule should be to familiarize clients with the prices of your products or services before sales are made. When your clients have invoices before they accept goods and services from you, they won’t be surprised about the size of their obligation.

 

Whether your business is thriving and you can’t keep up, or you are waiting on clients to pay their invoices, Universal Funding can help your growing company. Call us at 844.334.1683 or complete our rate form today to learn more about invoice factoring and how it can improve your company’s cash flow.

 

3. Have your clients sign a contract.

Many businesses don’t have their clients sign a contract before they sell them goods or services. A contract that makes it legally binding on the client to pay you, however, can be a useful insurance policy in the event that they are unable or unwilling to pay. A contract in the form of a personal guarantee can be easily enforced. In some cases, businesses have their clients sign a security agreement, a document that allows a business to create a lien on the assets of a client in the event of non-payment.

4. Make sure you have all the contact information that you need.

Sometimes, it is only once a client becomes unwilling to pay that businesses discover they don’t have enough information to contact them with. Before you deliver goods or services to a client you need to make sure that you have the name, phone number, email address and postal address of more than one person at the client’s organization. If one person is unreachable, you need to have other people to establish contact with.

5. Maintain detailed records.

It’s important to file away records of every interaction that you have with a client. Any time you have a phone conversation with a client, for instance, it would be a good idea to make a record of the date and time of the conversation, and notes of what was said in the conversation. Records of emails are important, as well. If a client seems reluctant to pay, you can tell them that you’ve kept detailed records. People tend to be less willing to deny payment to a business that has records that are likely to prove what they are owed.

6. Set up incremental billing.

When you implement progress billing or incremental billing, you let your clients know that payments are due at various stages through a project. When you send out partial invoices for work already completed, you don’t put an excessive sum of money at risk. You get paid at intervals and know that you need to stop providing goods or services in the event that partial payments aren’t made.

7. Follow up with clients on a regular basis.

Keeping up steady communication with your clients over the duration of a project or business deal can be a good way to head off complications before they occur. It can help to call up a client before the dispatch of goods or the start of a project, tell them about progress that’s made along the way, and inform them when goods arrive with them, or when the project completes. It can be harder for a client to deny payment when they have been in constant touch.

The bottom line.

Studies show that the possibility of collection rapidly shrinks once invoices become older than 90 days. Protecting yourself in each one of the ways above; performing credit and background checks, asking for interim payments, keeping records, and collecting customer information, can help you make sure that you always collect what you’re due.

About Universal Funding

Universal Funding is a private funding source that has funded thousands of businesses and more than $2 billion since 1998. We turn your accounts receivable into the funding you need through invoice factoring and can have capital in your hands in a matter of days. Call us today for more information at 800.405.6035.