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Chasing overdue invoices? Here’s what to do


Nobody enjoys chasing overdue invoices from customers and clients.

It’s not just the importance of that money to the business – particularly if it’s a significant sum. It’s also the fact it can consume so much time. This diverts credit control teams’ attention away from other invoices and prevents business owners from focusing on running the business.

Despite this being a situation many businesses face regularly, it doesn’t necessarily make it easier to recover outstanding invoices. Sure, past experiences help, but every customer and their reasons for not paying are different.

Nevertheless, there are steps your business can take when chasing overdue invoices from B2B clients to maximise your chances of a fast and successful resolution whilst reducing the burden.

Here, based on our two decades’ experience of recovering unpaid invoices on behalf of our clients as a commercial debt collection agency, we outline some of the most important.

1. Chase overdue invoices straight away

Seems obvious, right? Yet it’s amazing how many businesses take too long to chase their customer or inform them the invoice is overdue – whether because they’re not close enough to their credit control to realise or because they hope the customer will pay by their own accord.

Chasing them straight away is an important step for several reasons, but ultimately to help identify why payment hasn’t been made.

It could be down to a genuine mistake or an oversight that they’ll rectify immediately. Or it could be that there are major issues preventing payment. Perhaps they’re experiencing cash flow problems, there’s an issue with the invoice – or maybe they didn’t receive it. By contacting them quickly, you can understand why payment is outstanding early and work with them to resolve any issues.

Another benefit is that it demonstrates you’re on top of your credit control and that their payment is important. If your customer has multiple invoices outstanding, this action could get yours to the top of their pile.

Conversely, not contacting them will only fuel their belief they can withhold payment for longer. Remember too that, statistically, the longer an invoice is unpaid, the harder it becomes to recover.

2. Tackle their reasons for non-payment

Don’t take your customers’ reasons for not paying your invoice and their proposed remedies at face value. Their excuses could be stalling tactics that only push the late payment date further down the line.

Here’s how to deal with some of the most common late payment excuses:

“We didn’t receive your invoice”

Take a direct email address to send a copy invoice to immediately. Then, confirm receipt and ask for payment as soon as possible.

Make sure you also review your processes in case their excuse is genuine and there are improvements to be made. Check that it was sent to the right person (someone in their accounts payable department ideally), how those details were obtained (are you using account opening forms?), if there was a technical issue in your invoicing process (have you explored e-invoicing?) and, crucially, whether any other invoices or customers are affected.

In the future, call your customers after sending the invoice to confirm receipt and avoid this excuse altogether. These other credit control tactics are also beneficial before the invoice is due.

“The cheque is in the post”

Given payment is now overdue, ask your customer to pay by a more immediate method, such as bank transfer. If they refuse to do so, ask when the cheque was posted, whether it was first or second class, and confirm to which address it was sent.

If the cheque doesn’t arrive when you would expect, notify them immediately and again request payment via bank transfer. Should the excuses keep on coming, it suggests something could be awry and you may wish to instruct a debt collection agency to add further weight to your demands for payment.

(Again, this excuse can be avoided in the future by offering different payment methods)

“There’s a problem with the invoice/goods/service”

If your customer is disputing the information in the invoice or they’re unhappy with the goods or services provided, it may be something that can be quickly rectified. If not, but the dispute only relates to part of the work, ask for payment for the undisputed part while the dispute is resolved.

Where possible, ask for confirmation that payment will be made immediately once an agreed-upon resolution has been carried out. Also, ensure all communication is recorded for future reference.

Going forward, ensure your Terms & Conditions contain a clause stipulating that any disputes should be notified within a certain number of days from completion of the work.

“We don’t have the funds to pay”

Ask when the client feels they will be able to pay the invoice, as it could be that they’re waiting for a large payment from their own customer very soon.

If they’re confident they’ll be able to pay by a certain date and you’re comfortable with that, ask for written confirmation and then follow up should payment not follow. Alternatively, ask them to pay what they can now and the remainder on the date they gave you.

And remember, should your customer assure you the outstanding payment will be made shortly, ask when you can expect the cleared funds to be in your account. Then, set a reminder to check. If you haven’t received payment, be sure to follow up again and let them know.

Read this article for more ways on how to overcome common payment excuses

3. Update your cash flow forecast

If an invoice is overdue and you’re not expecting payment imminently, it’s important to consider the impact this could have.

Without that money, it could be difficult to meet your commitments, such as wages, bills, loan repayments and supplier invoices.

By updating your cash flow forecast, it will be easier to measure the impact it will have on your business and spot where any shortfalls exist. This insight could in turn affect the urgency and methods you use to chase your customer for payment.

If you are going to be short, consider offering early payment incentives to other customers whose invoices aren’t yet due. Or, explore whether a short-term funding facility is an option for your business.

Another option would be to contact your suppliers to explain the situation and negotiate an extension on any invoices owed. As you now know from experience, your suppliers would much prefer you to be open and honest about any issues that could impact the prompt payment of their own invoices!

4. Consider charging statutory interest

Did you know that, legally, businesses can charge their B2B customers interest and compensation on overdue invoices?

Under the Late Payment of Commercial Debts (Interest) Act 1998, which was extended in 2000, 2002 and 2013, you’re entitled to charge daily interest of 8% plus the Bank of England Base Rate as soon as the debt is classed as overdue.

Compensation ranges from £40 to £100 per invoice, depending on its size. This can help compensate businesses for the impact of late payment and contribute to the costs of chasing overdue invoices. If it’s a long outstanding payment, this can quickly add up.

Use the calculator below to see how much you could charge:

Not every business chooses to do so, largely due to their concerns over the impact this could have on relationships. But even if you decide not to enforce it, making your customer aware of the Act can be a useful incentive to encourage payment.

5. Know all of your options

When chasing overdue invoices, there can be a fine line between dedicating time to recover payment and this being counter-productive.

If you spend too much energy and resource chasing overdue accounts, it can be to the detriment of other invoices. Whilst these other invoices may not be due yet, they could go the same way without the required attention. For smaller businesses without a dedicated credit control function, unpaid invoices can take business leaders away from other core tasks.

So, it’s important to be able to recognise when internal efforts aren’t working or are consuming too much time. In these instances, instructing an external debt collection agency could be more beneficial.

As well as removing the burden from the business, debt collection agencies will use their expertise to chase invoices and recover payment quickly from the customer whilst preserving the relationship wherever possible.

Sometimes, the name of the debt collection agency can be all that’s required to encourage the customer to pay – regardless of the excuses they’ve been giving. Plus, their experience of recovering payment from all sorts of businesses will ensure the invoices are in safe hands.

The legal system is also an option for businesses to try to encourage payment from customers. However, this can be an expensive route. And, although the threat of a County Court Judgment can be a deterrent, gaining one doesn’t guarantee payment will follow.

Whichever avenue you choose, whether continuing to chase internally, using a debt collection agency or the legal system, you must do what’s best for your business.

To explore how Hilton-Baird Collection Services can recover unpaid invoices on your behalf, with the comfort of a success-based fee, request a call back to discuss your options or get an instant debt recovery quote.


Just some of our clients

  • Leumi ABL
  • BNP Paribas
  • Kreston Reeves
  • PNC Business Credit
  • Kroll
  • FRP Advisory
  • Custom Glass
  • Smith & Williamson
  • Harrisons Business Recovery
  • Santander Corporate & Commercial
  • Quantuma
  • Construction Recruitment Services
  • Close Brothers Invoice Finance
  • Wupwoo
  • Mazars
  • Leonard Curtis
  • Midland Rock
  • Barclays
  • NatWest
  • Wote Street People
  • Eazipay
  • SER Contractor

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