Chasing Unpaid Invoices? Don’t Make These 3 Mistakes

3-mistakesChasing unpaid invoices is a delicate business.

Do it the right way, and you get paid what you’re owed. Yay!

Do it the wrong way and you’ll ruin opportunities for future business. Boo!

Consequences Of Demanding Payment For Overdue Invoices The Wrong Way

  1. You might annoy customers enough that they switch to one of your competitors. That’s lost future income for you.
  2. A client that is a huge fan of yours right now may stop singing your praises if they were forgetful once and you racked them through the coals with your angry demands for payment.

3 Mistakes Not To Make When Chasing Unpaid Invoices

1. Never stamp your statements with an OVERDUE! stamp before you send them out.

2. Never assume they have received any of your reminders so far.

  • If you do assume they have seen your payment reminders you will get angry and your resentment will build up and up with every message you send.
  • Bad idea.
  • Consider the slate clear with every communication.
  • That way, your tone will be light and cheerful instead of dark and sinister

3. Never let 30 days or 60 days go by without you taking any action at all.

  • Train your clients on your expectations by acting fast when invoices are overdue only by a few days.
  • If you let it slide 30 or 60 days you are teaching them (and yourself) bad habits
  • As soon as you notice an overdue invoice, take action that instant

What Do You Think?

What other mistakes have you made in the past, or heard about, that you can share in the comments below?

Should You Threaten To Charge Interest On Overdue Invoices?

Who do you think you are? A bank?

Leave the interest charging game to the banks.

Charging interest on overdue invoices gives your clients 2 choices:

  1. Pay the invoice
  2. Not pay the invoice (and start accumulating interest which they are pretty sure they can weasel out of with a phone call I they can be bothered)

Why give them 2 choices when you really want them to only take option 1 to save you (and them) all the extra hassle?

Focus on your goal: To get paid.

Charging interest on overdue invoices is a distraction from that goal.

Automated Payment Reminders: Useful For Getting Late Invoices Paid?

Take a moment to picture your email inbox in your mind and imagine 10 or so unopened emails.

Now take a moment to consider the order in which you will open them.

Does the following order look about right?:

  1. Emails from people you know
  2. Emails from people you don’t know
  3. Emails from robots (email newsletters, automated emails)

The problem with automated payment reminders is that they are easy to identify as belonging in the 3rd category. And since it’s clear that there isn’t another person on the other end awaiting a response, they are also easy to ignore and/or trash.

friendly-robotTell-tale signs of an automated email:

  • The “from” field is not a persons name but a department or brand instead
  • The “via” field is routed through a 3rd party email provider
  • The language and tone of the body of the email is more formal than normal emails written by people
  • There is no email signature from a real person at the bottom of the email

To increase the chances of getting those late invoices paid, all you have to do is dump the automated reminders in favour of the personal touch.

 

Issue Invoices Sooner To Get Paid Sooner. Obvious?

Do you invoice at the end of the month?

Yes?

So you’re telling me that work you do on the 1st of the month gets invoiced on the 30th of the month and you ask for payment by the 20th of the following month?

That’s 50 days that money you are owed is in someone elses bank account.

And longer if that invoice is paid late of course.

It’s no wonder you have cash flow problems.

How about invoicing as you complete the work and have the invoice due within 7 days?

That would be 7 days before getting paid instead of 50.

Sound good?

Own An Overdue Stamp? Throw It Away Today You Silly Goose

overdue-stamp

If you own an overdue stamp then I have good news for you because today you are going to free up that drawer space or deskspace for something else.

By the end of this short article you are going to throw it in the trash because you won’t need it anymore.

First, imagine yourself as an accounts payable clerk sitting quietly at your desk with a pile of email or mail in front of you.

You open the first envelope/email and the document has a big red “OVERDUE” stamp that is shouting at you.

You feel like you were just slapped in the face with a wet fish.

Is that anyway to treat the person who is going to pay you?

It is a deep insult. It is shouting out “You are crap at your job! Paying invoices is easy but somehow you screwed it up! Wow, you really suck!”

That’s a great way to get your invoice shoved to the bottom of the pile because that’s their way of asserting their control over you after you insulted them. They don’t expect to hear from you for another 30 days anyway.

What you really want is for that invoice to be paid, right?

Using an overdue stamp will not help you achieve that goal.

So throw away your “OVERDUE” stamp now and find out how to get late invoices paid.

The 22 Immutable Laws of Marketing by Al Ries and Jack Trout

51b7BzdnqLL._SX330_BO1,204,203,200_This book is very old now: 1994, but much of the advice is still pretty good.

It’s a very easy read – each of the 22 chapters are only a couple of pages each. It’s not available on Kindle which is annoying but there are a few pdf versions floating around.

I found the notes of Chris Anuman which were better than mine so that’s what you’ll see below.

I also came across a very interesting series of articles arguing that these laws are overturned in the present day that’s worth a look at.

My notes (Chris Anuman’s notes actually) on The 22 Immutable Laws of Marketing by Al Ries and Jack Trout Continue reading “The 22 Immutable Laws of Marketing by Al Ries and Jack Trout”

Overdue Invoices? Simple Tips To Ensure Your Clients Pay On Time, Every Time. No More Overdue Invoices

  • Did you know that poor cashflow is the #1 killer of small businesses world-wide?
  • Do you have clients with overdue invoices right now?
  • Do you grit your teeth when you check your bank account on the 20th of the month and find the deposits you were expecting, missing?
  • Are your customers/clients slow to pay?
  • Are your invoices due on the 20th of the month but sometimes they don’t get paid until much later? Sometimes 60 days or 90 days?

Well you’re in luck, because today I’m going to tell you how I get the following results:

  • 89.6% of my clients pay on time (within 7 days)
  • 9.4% of my clients pay within 7 days past due
  • 1% don’t pay at all, but only because they go bankrupt (no fault of mine, I assure you)
  • I’ve never needed to use a collection agency

Here’s how you can get results like that:

4 Ways to Ensure Your Customers/Clients Pay On Time, Every Time

1. Change your terms to 7 days

Do it.

Right now.

Send out an email to warn everyone that it starts this week.

When your terms are 7 days your clients will file your invoices right under their accounts-payable-clerks nose for immediate attention.

Invoices that are due 20th of the month are so easy to ignore, or postpone, or forget about, or get lost.

“But my client’s accounting system can’t handle paying within 7 days!

Bullshit!

Ask nicely for an exception.

I’ve been paid within 7 days from Government Departments, City Councils and District Health Boards. Their policy is to pay 20th of the following month but they all made an exception for me because I asked for it.

2. Email your invoices instead of posting them

Ask for the accounts-payable-clerks email address and email them directly (and cc your contact at the company too).

No more posting. This slows things down far too much. And with 7 day terms, 3 of those days are used up in printing/delivery.

Don’t know how to convert your invoices to PDF? You don’t need Adobe Acrobat Professional (NZ$600!), just download 1 of hundreds of free/cheap PDF writers (they install as “virtual printers”).

3. Stop sending statements with OVERDUE stamps on them

Receiving a statement with a big red overdue stamps on it is like slapping your client in the face with a wet fish.

Acutally, it’s like slapping the accounts-payable-clerk in the face with a wet fish because your contact at the company will probably not even see this document.

Why would you treat the person who is going to pay you like this?

It is a deep insult. It is shouting out “You are crap at your job! Paying invoices is easy but somehow you screwed it up! Wow, you really suck!”

If you sent me a statement with a big red, angry overdue stamp on it, I would purposely not pay you just to piss you off.

4. Within a few days of the invoice being overdue, email a reminder

Send the following reminder to the accounts-payable-clerk and copy in your contact at the company too.

With these exact words: “Hi Bob, I just noticed invoice #1234 is a few days overdue. Would you like an extension?”.

That’s it.

Short.

To the point.

No waffle.

Notice the first part “I just noticed”? This lets them know that you know it’s overdue. It lets them know you are watching. Now they know that you know.

And notice how it ends with an open ended question?

I could have said “Let me know if you need an extension.” But this isn’t as powerful, because it isn’t a question. It’s weak. Don’t use it.

The magic of asking a yes/no question like “Would you like an extension?” is that people instantly form a response in their heads once they’ve read it.

There are two possible answers. Yes, and No.

Most of the time they are too proud to email you back and say “yes, could we have until the end of the month please?” (although some do, and that’s perfect fine, now you have a new due date to work with).

So they will think “no” in their head. “No, I don’t need an extension, I’m going to pay this today to show them how in control I am of my finances!”. You might not get an email response from these people but the payment will turn up in your bank account the next day.

Why this method works so well

You must stick to this schedule because this is how you train your clients. It lets them know what your expectations of them are, and they quickly learn what to expect from you next time.

If you ease up, that’s when it slips away and you’ll spend more time chasing overdue invoices and less time serving clients.

What if you still don’t get paid?

Wait another 7 days and send this email (and attach the invoice): “Hi Bob, could you check on invoice #1234 for me please? It is now a few weeks overdue. Would you like a further extension?”

What if you still don’t get paid?

Wait another 7 days and send this email (and attach the invoice): “Hi Bob, Invoice #1234 is now 4 weeks overdue. May I have payment today please or would you like a further extension?”

What if you still don’t get paid?

Wait 30 days and then email them every day with a variation like this:

  • “Hi Bob, just checking on invoice #1234, may I have payment today please, or would you like a further extension?”
  • “Hi Bob, could you have another look at invoice #1234 please. Could you arrange payment today please, or would you like a further extension?”
  • “Hi Bob, I just wanted to check on your payment for invoice #1234. Could you make that payment today please, or would you like a further extension?”
  • “Hi Bob, I was hoping to hear from you by now. May I have payment on invoice #1234 today please, or would you like a further extension?”

The key is to not get angry. Keep your tone respectful and calm. Don’t acknowledge that you are being ignored.

“Why not just pick up the phone and call them?”

Because emailing saves face. It’s embarrassing to make a call to ask someone to pay, and its even more embarrassing to receive one. Email creates a comfort zone.

“What if they do ask for an extension?”

Fantastic! That is a great outcome. It’s not as good as getting paid, but it is pretty close.

Remember, they have chosen the new due date, you didn’t choose it for them. So reset your reminders and as soon as that new due date lapses without payment, repeat the process outlined above.

“This seems like a lot of work, is it really worth it?”

Once you have set expectations using the suggestions above, very few clients will progress to the daily harassment stage.

“How about I just use a collection agency instead?”

No. It’s your problem. It’s your fault for not training your clients properly. You deal with it.

What do you think about this advice?

What tips do you have for dealing with late invoices? Tell your story in the comments below.

Abundance: The Future Is Better Than You Think by Peter H. Diamandis, Steven Kotler

This book was pretty darn amazing.51wCZoVxdSL._SX331_BO1,204,203,200_

I’m already a pretty optimistic guy but this book backed up that optimism with facts and reasoning. Fantastic stuff.

My favourite quote was “In today’s hyperlinked world, solving problems anywhere, solves problems everywhere.”

Let’s start with the table of contents because you might spot areas that interest you that you might like to know more about (I do encourage you to get this book, it’s only $15 on Kindle).

After that I’m just going to share my favourite parts of the book.

My notes on Abundance: The Future Is Better Than You Think by Peter H. Diamandis, Steven Kotler. Continue reading “Abundance: The Future Is Better Than You Think by Peter H. Diamandis, Steven Kotler”