Whether you are associated with the business world or the accounting field, you must know to define what is an invoice. In common words invoice refers to a document that explains the details of the products or services used by the clients and their pricing to be exact. The common invoice also explains what are the payment obligations for the customer, what payment method should’ve used, and what are the due dates of a particular payment. However, have you heard about the outstanding invoices as yet?
The invoices whose due date has passed, and such invoices are referred to as outstanding invoices. Further in this article we will learn and explore the basic introduction of such invoices as well as the smart strategies to deal with the late payments. Let’s begin with the basic understanding and get ourselves introduced to the outstanding invoices.
What is an Outstanding Invoice
An outstanding invoice refers to the payments that are unpaid by the customers who made a purchase of products or services offered by your business. You can send one as a reminder before the due date of the actual payment. This practice will help you to gather your payments before the due dates pass.
Moreover, if you are wondering about the past due invoices here now, they are the invoices that explain that the customer has not made the payment even after the due date of payment has passed. All the invoices are tracked by the accounts payable and they schedule the payment due dates. The job of the accounts payable department is to identify errors in the invoices and rectify them to ensure the record is error-free.
The Most Common and Smart Strategies to Deal with Outstanding Invoice
The invoices that are unpaid are definitely an inconvenience for the growth of your business, however, if they are not handled well, they are even threatening the life span of your business. This turns out to be a huge interruption in the cash flow which hinders your ability to pay your employees, vendors, and suppliers.
A stage comes in the worst-case scenario where you are without enough cash to keep your business well and operational. This will further spoil your business repute in the market. So, unpaid invoices should be a serious matter for a business. Therefore it is worse to practice some smart strategies to deal with this very common business hindrance. We have gathered the most common and smart strategies to deal with the late payments, they are listed and explained below:
- Cut Off The Client Until The Payment is Clear
- Phone Call Reminders
- Statement of Accounts
- Overdue Invoice
- Late Payment Penalty
Cut Off The Client Until The Payment is Clear: You are being unjust to your business growth if you are still providing your products or services to the customers who have not yet cleared the old payments. You need to cut off such customers and convey to them that they need to clear the old payments only then you will resume providing them with your products or services.
Phone Call Reminders: It has been observed that making phone calls to customers with late payments gives better results to companies than other methods of chasing the customers. It is difficult to ignore the ultimatums once you get your customer on the line to talk about late payments. Such phone calls should be handled politely. Just ask humbly as to when you should expect the payment or why is it overdue.
Statement of Accounts: A statement of accounts is a good way to keep the track of the old overdue payments and the recent ones as well. Sending the account statement can be helpful to get your customers to realise how frequently they are being appeared in the history of late payments and the penalties they are paying with this.
Overdue Invoice: A visual and effective strategy to keep your customers on ties is to send them the overdue invoice. This overdue invoice is just another simple invoice, however, you put an overdue stamp on it to alarm the customers. If you intend to do it online, you can email the invoice along with a watermark of overdue payment.
Late Payment Penalty: A good and popular strategy is to make demands of money as a penalty with late payments as this encourages the payments to be clear in a timely manner. This can be practised smoothly if you have clearly mentioned the terms and conditions of late payment and penalty at the beginning of the sale. The best practice is to make your customers sign the terms and conditions before selling them your products. This way you will keep them aware of the late payment policy.
The Bottom Line
Finally, the discussion of outstanding invoices and strategies to handle late payments has come towards wrapping up. We can sum up by saying that it is important to handle late payments with smart and effective strategies to ensure your business valuation is growing. Otherwise, the late payments can hinder your business repute in the market and even threaten your existence in the business world. We hope these few minutes of reading will help you to handle your late payments well.
Disclaimer: The information about outstanding invoices provided in this article including text and graphics is general in nature. It does not intend to disregard any of the professional advice.