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Unpaid outstanding invoices are challenges that 87% of businesses have to face, but chasing them through reminder emails and phone calls is an effective way to get paid and avoid damaging client relationships.
When sending emails to chase overdue payments, make sure to quote the invoice number and maintain a friendly and polite tone.
Imagine working hard to deliver a top-notch service or a product, but it’s been weeks, and you still haven’t been paid. This can be a real headache for anyone, especially if you are a small business owner trying to keep everything running smoothly.
Chasing outstanding invoices is a delicate task; you need to be paid for the services or goods you’ve provided, but you don’t want to upset your clients or ruin potential business opportunities.
If you’re facing this stressful situation, you’ve come to the right place. In this article, we’ll explore four tactful ways to chase outstanding payments, complete with email templates that you can use to ask for payment politely. So, keep reading to discover practical tips to manage outstanding invoices effectively without harming valuable customer relationships.
An outstanding invoice is a sales invoice that was successfully sent to a client but has yet to be paid. It is also known as an unpaid invoice or an open invoice.
When you create an invoice, the payment terms will indicate the period the client has to pay for the products or services purchased.
For example, a net 30 payment terms inform the receiver that the invoice is payable in 30 calendar days. The invoice is considered an outstanding invoice before the client makes the payment within this time frame.
💡 Tip: Payment terms, especially the due date, should be agreed upon between the seller and the buyer. This helps both parties plan their cash flow and budgets accordingly.
The term outstanding invoice is sometimes used interchangeably with overdue or past due invoice. However, while all overdue invoices are outstanding invoices, not every outstanding invoice is overdue.
Outstanding invoice refers to invoices received by the client and waiting for the payment to be processed.
On the other hand, an overdue invoice refers to when the seller has yet to receive the outstanding payment past the due date.
It is important to make sure that your customers pay the outstanding balance before the invoice due date so that you can ensure the smooth operation of your business, as well as maintain a good business reputation.
With your business not being able to receive an invoice payment on time, you may have to deal with a series of adverse challenges. Particularly, unpaid invoices can disrupt your cash flow management and financial cycle, causing consequential effects on paying bills and managing staff. Handling outstanding invoices professionally is crucial for maintaining mental well-being as well as business health.
Moreover, 89% of businesses report that overdue outstanding payments are an obstacle to company growth, with an average of 14 hours each week spent chasing unpaid payments.
If you are doing business with other suppliers, having multiple overdue invoices means you are at risk of falling behind your own payments. As a result, your current credit standing and future credit approval are also impacted.
Overdue outstanding invoice is a problem that 87% of businesses have to face. Several factors can cause overdue payments, such as miscommunications, an unorganized invoicing process, or other underlying customer disputes.
However, most of the common causes of delayed payments are preventable.
Here are some approaches you can take to prevent overdue outstanding invoices and improve the chance of getting paid on time.
Although there are preventative measures that can be utilized to get paid on time, over half of businesses have to spend at least 4 hours each week chasing invoices that are overdue.
Here are the effective ways to track outstanding invoices and chase late payments without losing clients.
Surprisingly, 11% of the invoices failed to reach the customers.
If you are sending invoices via email, there is a chance that the invoice may be lost in the customer’s inbox. Sending follow-up emails to remind the customers at a certain point before the due date is a way to avoid overdue payments.
When the due date has passed, you can send an overdue invoice email reminding the client of the outstanding invoice and requesting payment.
Although chasing unpaid invoices can be frustrating, your payment request email should be friendly and polite to avoid losing customers in the process. You can also encourage the customers to contact you if you can facilitate the outstanding payment. The email should include the following details:
Here are some invoice payment reminder email examples you can use, depending on your relationship with your client, the business size, and how long the invoice is overdue.
Subject: Friendly Reminder: Invoice STA-001 Due
Dear [Client Name],
I hope this email finds you well. I just wanted to follow up on the invoice number STA-001 I sent over for [project name], which is now due.
I understand that sometimes payments can slip through the cracks, so I just wanted to send a friendly reminder that the invoice is now due.
If you have any questions or concerns about the invoice, please don't hesitate to reach out to me. I really appreciate your business, and I'm looking forward to working with you again in the future.
Thank you for your attention to this matter.
Best regards,
[Your Name]
Subject: Second Notice: Invoice STA-001 Due
Dear [Client Name],
I hope this email finds you well. I wanted to follow up on the invoice number STA-001 I sent over for [project name], which is now overdue.
I understand that unforeseen circumstances may have caused a delay in payment, but I kindly request that you take action to settle the outstanding balance as soon as possible.
Please let me know if there is anything that I can do to help facilitate the payment process. If payment has already been sent, please disregard this email.
Thank you for your attention to this matter. Your prompt response will be greatly appreciated.
Best regards,
[Your Name]
This template is primarily for outstanding invoices that are long overdue.
Subject: Urgent Action Required: Invoice STA-001 Overdue
Dear [Client Name],
I hope this email finds you well. I wanted to bring to your attention that the invoice number STA-001 I sent over for [project name] is now considerably overdue.
As a valued client, I understand that you expect prompt payment, and I kindly request that you take immediate action to settle the outstanding balance. If there is an issue with the invoice, please let me know as soon as possible so that we can resolve the matter.
Please note that if payment is not received within the next five business days, we will have to take further action to recover the debt.
Thank you for your prompt attention to this matter.
Best regards,
[Your Name]
It is also helpful to attach an overdue invoice with the email when chasing an outstanding payment.
Typically, chasing payments for outstanding invoices with a reminder email leads to prompt payment without the need for legal action. However, in the worst case where legal action is required and has begun, you should no longer contact the client directly.
If your clients do not reply to emails, giving them a phone call can get you a faster response about the overdue invoice payments.
You should quote the invoice number and clearly state the amount due and the payment date, then inquire when the client would make the payment.
As a phone call is a more direct approach than an email, make sure that your tone is polite, professional, and friendly to avoid disputes.
💡 Important: Always include an invoice number in the emails or phone calls to ensure that you are referring to the correct invoice.
If your client refuses to pay for an extended period, you can automate sending payment request emails with an overdue invoice attached.
For some businesses, there may be too many outstanding invoices, so sending out payment reminders manually is time-consuming and impractical. Setting up automated emails may be a more efficient choice to help keep a healthy cash flow.
Additionally, you can also use invoicing software that can help you manage outstanding invoices with the following features:
In the worst case, things might get out of hand when chasing payments from your client. If the payment has been long overdue, you may have to consider seeking legal advice.
There are several different courses of action that you can take when your clients refuse or fail to pay. For example:
Unpaid invoices with significant outstanding amounts can cause stress and harm the financial health of your business. According to the late payment report, businesses are most likely to receive the outstanding payment within a week after the due date if they follow up with 90% of their invoices.
To avoid having to deal with delayed payments, you can send a reminder email up to 10 days before the invoice due date. After the payment date has passed, you can send a friendly reminder instantly in 1-3 days.
While chasing outstanding invoices can be a tedious process, there are various effective strategies that can help you get paid on time.
A professional and proper invoice template ensures that your customers can process the payments with ease. If you constantly have to chase unpaid invoices, you may have to review your invoice template to see whether it includes all the essential details and is easy to understand.
