Phone now
0333 800 8919

Overdue Invoices – What is your best option?

Are you dreading chasing your clients for overdue invoices? Here’s some simple steps on what to do.

No one enjoys chasing their clients for overdue invoices. The importance of cashflow running through any business whether it be a large PLC employing thousands of people or a Limited company with one Director is imperative to its survival. If your business is owed any type of debt particularly if it’s a significant sum, then it can consume so much of your employees time. It can also divert credit control teams attention away from other invoices and prevent Directors from focusing on running their business.

Many business face chasing their clients regularly for a whole host of different reasons and excuses that their clients may present to them. There are simple steps businesses can take when chasing overdue Business to Business clients to maximise their chances of a fast, effective and successful resolution, which in turn will reduce the burden on staff and their Credit Control departments.

1. Chase any overdue invoices straight away

This is not rocket science, but you would be surprised at how many businesses contact us and they have taken too long to chase their clients, or even inform them that their account is overdue. This can be for a number of reasons, i.e They don’t want to annoy the customer for fear of no more reciprocal work, poor Credit Control procedures, or because the business hopes that their client will pay of their own accord.

Chasing your clients as soon as their account has become overdue is a very important necessary step to identify exactly why payment has not been made and to also bring it to their attention.

A client may have made a genuine mistake or may not have received the invoice and this will rectify the situation immediately without the need for any further action. Or perhaps they are experiencing cashflow issues or they maybe disputing the invoice. By contacting them straight away this enables business to resolve any issues before they are left to fester and get out of control.

Another benefit of this approach is that the business has productive and effective credit control department. This also emphasises to the client that their payment is important and could encourage them to pay you the business in front of any other creditors who may not have a good credit control structure in place and have not been in contact.

If clients are not contacted about outstanding payments then this will inspire them to without payment for longer. Statistics prove that the longer an invoice remains unpaid and not chased the more difficult it will be to recover.

2. Tackle any reasons for non-payment head on

Clients can produce a number of reasons and excuses for not paying an invoice or an account. Don’t take their suggestions or remedies at face value. 9 times out of 10 these will be stalling tactics that will push their late payment further down the line.

Here are a few of the most common excuses and how to deal with them –

“The cheque is in the post”

A very popular excuse still to this day, even though most businesses don’t even use cheques anymore! The fact of the matter is the payment is overdue and the client should be asked to make payment by another method like BACS or a card. If they refuse to make payment using these additional methods then they should be questioned as to when the cheque was posted, by first or second class post and the address it was sent to.

If the cheque does not arrive as promised then the client should be chased immediately and informed that they must make payment immediately by BACS or card. Should they fail to do this and continue to make excuses and false promises then you may wish to instruct a debt collection agency like Debt Collect UK Limited (link to contact form) to apply further pressure to your demands for payment.

“We have not received your invoice”

A direct email address should be taken and a copy invoice emailed over whilst the client is on the phone, receipt should be confirmed whilst they are on the phone and they should be asked when they intend to make payment.

“We are disputing the invoice”

This is also a very common tactic of delaying payment used by clients. If they are not happy with the goods or services the business has provided then this maybe something simple and can be quickly rectified. If the dispute is more complex then you can ask clients if it relates to the full invoice or account and if they can make payment for any undisputed part of the invoice or account whilst the dispute is resolved.

Where it is possible, businesses should ask their clients for confirmation that payment will be made immediately once any dispute has been resolved. All correspondence and communication should be recorded in case litigation is required to recover the account further down the line.

The companies terms and conditions should also be reviewed. Clauses can be added that stipulate any disputes or queries must be raised within a certain number of days from the completion of work or delivery of goods.

“We don’t have any cash”

The clients should be asked when they think they will be in a position to make payment and why their cashflow has been effected.

If they think they will be able to pay by a certain date and this is acceptable to the business then this should be noted on their account and they should be asked to send written confirmation of this. Written confirmation is an excellent form of evidence to present to court should you need to start proceedings against the client at a later date. The client should be asked if they can make a part payment, with the remainder being made at the agreed date. Credit Controllers should then set a reminder in their diary to check and see if payment has been received, if not this should be followed up immediately.

3. You can charge statutory costs and interest

Businesses can legally charge their Business to Business clients Interest & compensation on their overdue invoices under The Late Payment of Commercial Debts (Interest) Act 1998 www.legislation.gov.uk/ukpga/1998/20/contents

which was updated in 2002 and 2013 and is currently The Late Payment of Commercial Debts Regulations 2013 www.legislation.gov.uk/uksi/2013/395/contents/made . Under these regulations businesses are permitted to add feasible compensation and interest at the Bank of England Base Rate plus 8%.

Late Payment Calculator

Please see link below to Late Payment Calculator

www.contractorcalculator.co.uk/late_payment_calculator.aspx

Many businesses are not aware of the act, or choose not to use it due to the impact this could have on the relationships they have with their clients. However, even if they decide not to enforce the additional costs it may force their clients to pay over other creditors or more promptly.

4. Consider all of your options to get the account recovered

Chasing overdue invoices can be very time consuming for staff, and there is a fine line between dedicating time to recover payments and this also being counter-productive for the business over all.

If a business spends too much time and man hours recovering overdue accounts it can be to the detriment of other invoices and clients who are maybe of more worth to the business and require more time and attention. Whilst some of the other invoices might not be due yet, they could also fall into arrears if not given the correct attention and cause a bigger chain reaction within the business. This is particularly prominent in smaller businesses who don’t sometimes have a dedicated credit control department, and late payment of accounts can take the Directors of the business away from their daily tasks, again losing revenue for the business.

It’s extremely important that business recognise when their internal methods aren’t working or they are consuming too much of their time. In these instances instructing an external debt collection agency like Debt Collect UK Limited could be much more beneficial. We advise our clients not to let invoices get any older than 90 days before instructing us, depending on their payment terms, or the terms and conditions of a contract they maybe working on.

As well as removing the burden from the business, debt collection agencies will use their experience and their expertise to chase outstanding accounts, and they will recover payment quickly from the debtor whilst hopefully preserving the relationship where this is possible.

A debt collection agency just getting in touch with the debtor can sometimes be all that’s required to get the debtor to pay, regardless of all the excuses and false promises the debtor have been giving. Debt collection agencies have experience in recovering debts from all sorts of sectors of business from Construction to Hospitality and everything in between. This will give reassurance to the business that their invoices will be recovered professionally and efficiently.

Debt Collect UK and some other debt collection agencies also use the legal system to recover debts for their clients. Debt Collect UK can present Winding Up Petitions or raise Judgment in England, Wales and Northern Ireland and Decree in Scotland and have this enforced. Although this doesn’t guarantee payment and comes with some expense, it is also a very effective way of recovering outstanding accounts.

At the end of the day a business must choose what’s best for them. Here at Debt Collect UK we have 20 year’s experience as a commercial debt collection agency and recover millions of pounds worth of unpaid invoices every year on behalf of our clients.

Interested? Get in Touch Today

Do you have an outstanding invoice and want to know more about how to go about collecting this?

Contact one of our debt recovery specialists today.

For free initial debt collection advice please call us on 0333 800 8919 or contact us online.