We’ve all been there: tracking down an outstanding invoice from a customer. It’s time-consuming, frustrating, worrisome, and frankly, it’s just plain not fun for either party involved.
But the question is, how? How do you approach a customer who owes you money? What are the proper protocols? How do you make sure that you’re getting paid without interrupting cash flow?
No need to worry. Let’s talk about the right way to jump these hurdles while still offering a phenomenal customer experience.
Accept credit card payments
While this tip might seem out of place when discussing how to follow up on an outstanding invoice, it actually goes hand in hand. By simply accepting credit cards, you give your customers an easy payment option that most of us rely on – not to mention that by accepting credit cards as a form of payment, you can usually bypass all of the headaches that come along with late payments and collecting receivables. You can even store credit card information to establish recurring billing.
Create a follow-up protocol
At Nuve, we have made it a part of our routine to follow a step-by-step protocol for collecting past due payments. Start by having a firm grasp on your invoicing schedule. Since we bill weekly, our protocol is within those parameters.
Have a structure for your communication
After two outstanding invoices, follow up with a soft email. For us, that’s at about 22 days. This is a quick, friendly reminder about the outstanding invoice. Remind them of the payment terms as well as the records of payment. Include phrases like, “Thank you so much for your business” and “Let us know if your records indicate a different balance.” This should be a gentle reminder.
About a week later, shift mechanisms for communication. If you started with an email, make a phone call or send a text. If you are using a phone call, it’s a good idea to have a script to use. This will keep your outstanding invoice calls consistent.
After 45 days or so, start to shift your tone. Don’t hesitate to be slightly harsher or recognize the need for urgency, however, stick to the facts. A blanket, “Our records indicate your invoice is past due,” email works well here.
Around day 60, reach out via text/phone call again with a reminder of the payment terms like, “Our invoices are due upon receipt” as well as listing the outstanding balances. At this point, plan to inform your operational team of the issue as well via an internal email. Be sure that your protocol establishes three touches with the customer before escalating to involve someone with more authority internally.
Around 75 days, it’s time to escalate your tone to one that would be considered more cut and dry. Include all necessary information about their outstanding invoice(s). At this point, send another internal email to your operational team letting them know about the situation and encouraging their involvement.
By day 90, it’s time to shift your tone again. Use phrases like, “Your immediate attention is required” and “Your account is seriously past due” to spark urgency and concern. At Nuve, we understand if a customer needs to negotiate their bill or payment schedule – we just want open communication. Decide if this strategy works for you. If it doesn’t, add your terms to your protocol. And again, send another internal email.
By day 120, send a final, harshly worded email along with a certified mail return receipt. Useful phrases here include things like, “This matter is urgent” and “Your complete attention is required.” Reiterate that you have tried to reach them several times leading up to this email.
If you still haven’t received any communication about the outstanding invoice after 135 days, it’s time to move on to another internal email. The outstanding invoice(s) should be sent to a collections agency by day 150.
Be proactive with outliers
You might run into things like misinformation or even simple email address errors. The first time someone pays you, be sure you introduce yourself as the payables contact and verify that they’re the person who should be receiving the invoice. In the email, include the types of payment you accept as well as confirm that you have the correct contact information. Not only does this make for an impressive first impression, but it gives you the opportunity to nip any potential issues in the bud and even avoid debt collection altogether.
Since a lot of your customers will pay you like clockwork, your payables contact will almost immediately notice when something shifts and there’s a change in normal behavior. This should be a red flag that something is up. Instead of wondering what the problem is, address it head on. We like to send an email to our contacts explaining the behavior that we’ve noticed and check-in on them. This is non-threatening and a slam dunk example of quality customer service.
Along these same lines, look for payments that might be out of sequence. This implies that either an invoice wasn’t received or that they’re disputing it. Another email template takes care of this easily. Again, by approaching it head-on, you’re avoiding collections.
Unfortunately, sometimes, it’s not as easy as an abnormal behavior or an error in information, and this is where true collections processes come into play. In fact, you might even hear the promise that a payment is coming – or better yet, it’s already in the mail to you. Keep a record of any email or phone conversation that includes communication with this customer and/or implies that payment is coming your way.
Before you send to collections
Two words: certified letter. The thing about collecting money is that you want to be able to demonstrate a consistent escalation to your customers when they aren’t paying. One under-used escalation is the certified letter. We don’t get much mail anymore so a certified letter 1) demonstrates a level of escalation and 2) gives you a record that your customer received your last effort before the nuclear option – “collections agency.” Also the certified letter is the first step of a collections agency, so why not try it? If it works, you save yourself 33%.
Working with collections
When it comes time to escalate to collections, the best advice we give can be found on a somewhat cheeky yet truthful World War II poster: Keep calm and carry on. After all, you’ve already worked through your follow-up protocol and documented each and every conversation (or lack thereof) that you’ve had with your customer.
You’ve been the nice guy, and you’ve dipped your toes into being the bad guy. But unfortunately, your strongly worded emails and consistent phone calls haven’t lit a fire under your customer, and they’ve been fairly uncommunicative for months. As if that wasn’t frustrating enough, now comes the really hard part, and the part that very few want to participate in: collections.
Working with a debt collector is one of the necessary evils of being a business owner. It’s never easy for any company to send a customer to collections, but with our help (and your promise to continue calmly), you’ll rock it like a pro.
First things first – make sure you have a policy in place for determining when it’s time to send someone to a collections agency, and keep it a part of your routine. If you have a policy in place, you’re less likely to make a call to collections based on emotions or judgement, and instead, will simply be following the protocols you put in place.
At the end of the day, be intentional and have a natural way to escalate your communication that’s not threatening or odd. Your customers will know your expectations and will work hard to live up to them. And if they don’t, you’ve got a policy in place to protect your business and your bottom line.
Looking for more guidance? We’re here to help. That’s why we designed this downloadable template for you to use in your invoicing processes: How To Follow Up On Accounts Receivables. We know you’ll love being able to copy and paste this just as much as we do!