5 steps to get your outstanding invoices paid ASAP
Do you have a client who regularly pays invoices late or is refusing to pay at all? It is a common problem in business and most of the time a friendly reminder or a conversation about the issue will rectify the problem.
However, in the event this does not work, you should have a process in place to retrieve your money as quickly as possible as it may be difficult, or even impossible, to recover the money if the client becomes insolvent and goes into administration/liquidation or bankruptcy.
Here are some steps you can take to ensure you get paid on time:
1. Clearly state your terms of payment on tax invoices. Provide your terms and conditions for payment prior to providing goods or services to your clients. It is worth getting your lawyer to set up this document. State that assigned rights are not transferred until full payment is received and outstanding invoices will result in COD terms and debt recovery services will be used to the full extent of the law.
2. Record each time you attempt to contact the client about outstanding invoices: Send a short reminder email/letter to the client about the outstanding invoice. A suggested contact timeframe is as follows:
- 2 weeks overdue notice – A polite reminder in the event the invoice has been missed in their payment schedule.
Example: “The financial pressures on businesses during COVID times impact all of us. Occasional short term cash flow problems may inhibit your ability to pay on time. We value our business relationship so we are happy to temporarily revise terms of payment for future invoices to be COD until the outstanding invoices are settled.”
- 4 weeks overdue notice – This works better as a personal phone call NOT an email/letter. You may wish to repeat what you said before but this time end the call by saying you will send an email/letter stating the agreed fixed date of payment agreed (5 – 10 business days ahead).
- 5-6 weeks overdue – Send a Final Notice by email or letter (red text recommended):
Example: FINAL NOTICE – Payment of outstanding invoice #… has NOT been received by the date we agreed in our phone call and confirmed by email sent on (date). The matter will now be referred to our lawyers/debt collection agency.
- If invoice is paid, please acknowledge payment promptly (green text recommended).
Example: Thank you for payment of invoice #…… The existing COD terms of payment will continue for 6 months to assist in managing cashflow for both of our businesses. We look forward to building a mutually beneficial business relationship.
3. Send a letter of demand. Consult a lawyer/debt collection agency to send a letter outlining the goods/services you provided, the amount owing, and requesting payment within 7 days or legal proceedings will be issued and further costs will be added to the debt.
4. Commence legal proceedings (the invoice is now at least 8 weeks overdue): Use a reputable debt recovery solicitors or organisations to maximise your chances of successfully obtaining the desired outcome. The costs incurred in debt recovery and interest applicable (either pursuant to your stated terms and conditions or at the current Reserve Bank of Australia rate) can be claimed from the debtor.
5. Enforce your money order or judgment. When you have received a judgment or enforceable money order, decide on your enforcement option. If the debt is large (over AUD $20,000 consult a registered liquidator who is a specialist insolvency accountant).
By following these 5 steps, you are making sure your client has been adequately notified of the unpaid invoices and you can use the records of your attempts in court if required. Following these steps increases your chances of getting paid but you may still struggle to retrieve the money if the client is struggling financially.
Here’s where Auxilium Partners can help you. We are insolvency experts and registered liquidators and we can act on your behalf to recover large debts.
The first meeting with Auxilium is always free. Contact us today to discuss your situation.