How to Handle Unpaid Invoices: 5-Step Guide

Invoices are a big part of the business world. This is because they help organisations to keep smooth and consistent cashflows. If you remove invoices from the equation, then it would lead to financial chaos and confusion – especially for SMBs. 

Unfortunately, unpaid invoices are quite common. You might be surprised to learn that this has led to small businesses being owed over £23 billion in unpaid invoices. But why is this? 

There are many reasons why invoices sometimes don’t get paid, such as: 

  • The client is experiencing financial problems 
  • The client is unsatisfied with the product or service 
  • The client simply forgot to pay 
  • There’s been some kind of confusion regarding banking details
  • Invoice deadlines have been miscommunicated
  • free invoice generator online

Whatever the reason why one (or multiple) of your invoices hasn’t been paid, you’ll no doubt want to fix the situation. After all, as was just mentioned, invoices are key to your cash flow.

Here is a helpful 5-step guide that should ensure you get your invoices paid and ticked off your list: 

Step 1: Use Export Factoring 

Export factoring, also known as invoice factoring, is when a financial intermediary (sometimes a private lender) steps in and essentially advances you the money that’s owed for the invoice by customers based abroad. Usually, you’ll receive the money within 24 hours or a couple of days at most, allowing you to quickly stabilise your cash flow and relieve the stress of your unpaid invoice. Then, when your client pays the invoice in the future, you can pay back the funding. If you don’t know how to find a funder, a broker can provide you with a free quote and the best-fit companies for your needs.

Step 2: Make Contact with Your Client 

Whether your client lives in the local area or is in a completely different time zone to you, it’s essential that you make contact with them. The best way to do this is via a phone call. If this isn’t possible, contact them via email or SMS instead. 

It’s important to be as professional as possible when you do this. Let the client know why you’re contacting them and that you would like the invoice to be paid. Hopefully, the issue can be settled right there and then! However, if the client gives a reason why they can’t pay the invoice (e.g., they can’t afford to right now), then you’ll need to move on to the next step. 

Step 3: Negotiate 

Because the client is unable or unwilling to pay the invoice, you’ll need to negotiate with them

Say that your client can’t afford to pay the invoice. During a situation like this one, you should arrange a new deadline for the invoice and perhaps even allow the client to pay in installments. Not only will this put them at ease, but it’ll also make them more likely to agree!

Step 4: Send Reminders

With the new terms agreed upon, make sure to send reminders to the client regarding invoice payments. Also, you should document these reminders as proof for the next step if needed. 

Step 5: Take Legal Action 

If your invoice (or invoices) is still not paid and the deadline has passed, the next (and final) step is to take legal action. In this situation, most businesses contact specialist unpaid invoice lawyers. The case will be handled by these lawyers quickly and efficiently. Providing that you’re in the right and the product or service you provided was of the agreed quality, you should win your case. 

Vivek is a published author of Meidilight and a cofounder of Zestful Outreach Agency. He is passionate about helping webmaster to rank their keywords through good-quality website backlinks. In his spare time, he loves to swim and cycle. You can find him on Twitter and Linkedin.