In the United Kingdom, almost every business will experience an unpaid invoice at some point.
Each unique one will have their own way of pursuing payments from delinquent clients that leave these unpaid.
Even the most stringent credit control system can falter as a result of invoices not being paid.
All businesses need to ensure that they are paid on time, as this can affect the longevity of it if not.
The damaging of cash flow is one of the main issues that result in some businesses going into liquidation.
This is especially true if the reasoning for the affected cash flow is due to the non-recovery of unpaid invoices.
It has been reported that around 82% of businesses that fail cited cash flow problems as a factor for this.
Should you or your business find yourself in a situation like this, you must do everything you can to recover what is owed to you.
There are certainly ways in which this can be prevented, however when it is too late you must take immediate action.
Choosing the wrong options, such as abandoning the debt, can cause further financial issues for the business.
In this article, we have put together a list of our “Top 5 Tips for Pursuing Unpaid Invoices”.
How To Pursue Unpaid Invoices – Top 5 Tips
Pursuing unpaid invoices can sometimes be a challenging task for those that are inexperienced in this.
This is understandable considering the severity of the circumstances of the situation.
We have put this guide together to ensure you pursue your invoices in the most effective way possible. By following the steps mentioned below one can get payment on time.
- Communicate With The Client and Chase For Payment
The first point of call when pursuing unpaid invoices is to communicate with the client to make them aware of the overdue invoice.
It is a common occurrence for businesses to think they are being rude or hassling by chasing for payment.
Whilst this is understandable, chasing for payment that is rightfully yours is part of everyday business culture.
To avoid any negativity from the debtor whilst chasing them, you should act in a professional and polite manner.
This should also help to not jeopardise the existing relationship with the debtor.
- Implementing Payment Terms and Agreements
Payment terms are one of the most recommended tactics during the pursuing of unpaid invoices.
These are agreements that are signed prior to any goods or services being provided.
They are to be signed by both the business and the client and outline how much is to be paid and on what date.
Commonly, the payment date of all invoices is 30 days following on from the completion of the services.
Some businesses may even push this to 60 days depending on how much they trust the client in question.
Due to the nature of the agreement, this means the debtor cannot get away with not paying.
- Charge Interest on Any Late Payments
As per the Late Payment of Commercial Debts (Interest) Act of 1998, this allows businesses the right to charge interest on unpaid invoices.
Doing this to any late payments is a good way of getting the debtor to pay what is owed.
This is undertaken by adding interest to any invoice payments that become overdue.
The debtor is more likely to pay if the possibility of having to pay more than was originally owed is threatened.
If they fail to pay following the addition of interest, you may be able to recover more than you are owed.
- Send Final Payment Reminders
If you have tried the above methods and have not received payment, you should send the debtor a final payment reminder.
Final payment reminders are designed as a last step to get your unpaid invoices paid.
This should be sent as a letter with recorded delivery, or an email with read receipts.
Knowing when your debtor has received this reminder will indicate whether they have intentions to pay.
- Instruct A Professional Debt Collection Agency
If the previous points have failed to provide any form of payment, using a debt collection agency is by far the best method.
Across the UK there are many agencies that specialise in both Commercial and Private Debt Collection.
For commercial debt collection, Federal Management are known as the UK’s leaders.
These agencies are experts in the industry and have specific training and experience to recover any form of commercial debt.
There are many benefits to using agencies such as Federal Management, including:
- Average recovery rates of up to 90% on all undisputed debts.
- Nationwide collection offices.
- Low commission rates.
- Business relationships are not jeopardised.
- Authorised and regulated by the Financial Conduct Authority.
An unpaid invoice should always be recovered if it is practicable to do so and this is the best way of doing so.