How to Deal with Outstanding Invoices

Managing outstanding invoices can feel like a constant tug-of-war between maintaining cash flow and keeping client relationships smooth. Late payments disrupt your business’s rhythm, but with a solid strategy, you can tackle them effectively. Here’s a practical guide to handling overdue invoices while incorporating credit control and factoring to keep your finances on track.

Clear payment terms

First, establish clear payment terms from the start. Before sending an invoice, ensure your clients know when payment is due—whether it’s 7, 14, or 30 days—and what happens if they miss the deadline. Include these terms on contracts, quotes, and invoices. Clear communication sets expectations and reduces confusion. For example, state “Payment due within 14 days” prominently on your invoice, along with accepted payment methods and any late fees (e.g., 2% per month). This upfront clarity helps prevent disputes later.

When invoices go unpaid, act quickly but professionally. Send a friendly reminder the day after the due date, assuming it’s an oversight. If there’s no response, follow up every 5-7 days with increasing firmness. For example, your second email might say, “We noticed your invoice #1234, due on [date], remains unpaid. Please settle the balance of £X by [new deadline] to avoid late fees.”

Keep records of all communication in case you need to escalate further. Most clients will pay up with a nudge, but don’t hesitate to pause services or involve a collection agency for stubborn cases.

Factor your invoices

Factoring is another tool to consider, especially if cash flow is tight. With factoring, you sell your unpaid invoices to a third party (a factoring company) at a discount—typically 70-90% of the invoice value. You get immediate cash, and the factoring company handles collections. This can be a lifeline for small businesses, letting you cover expenses without waiting for payment.

While fees apply, the immediate liquidity can be critical for small businesses facing inconsistent payment schedules.

To discuss the funding options available to your business. Please do not hesitate to contact us on 0161 280 4220 or lynnew@regencyfactors.com

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