7 (Tactful) Ways to Get Clients to Pay Outstanding Invoices

7 (Tactful) Ways to Get Clients to Pay Outstanding Invoices
Tracking down invoices can be an added nuisance to running a business, try these tips to make managing overdue invoices as easy as possible.
by Paige Newberry Nov 07, 2018 — 4 min read
7 (Tactful) Ways to Get Clients to Pay Outstanding Invoices

This article is for educational purposes and does not constitute legal or tax advice. For specific advice applicable to your business, please contact a professional.

Chasing down invoice payments is often the last thing you want to do as a small business owner. Once an outstanding invoice becomes overdue, tracking down payment from the client can be frustrating as it takes your time away from the tasks that need to be done.

While unpaid invoices may be hard to avoid, there are some things you can do and tools you can use to help make collecting on overdue invoices less stressful.

How the invoicing process works

Ready to send an invoice to your customer? Whether you use an invoicing template or start an invoice from scratch, the first step in the invoicing process is adding the invoicing details, line items, and total amount due. Once an invoice is ready to send, you’ll want to determine what the customer’s payment options are and how you’d like to send the invoice.

Invoices can typically be sent digitally by email or text message or manually by providing a physical invoice. Most importantly, the amount owed, the due date, and the payment terms should be clearly laid out for the customer on the invoice provided. Any invoice that has been sent by you and received by the customer will be an outstanding invoice until it is paid prior to the due date.

Outstanding invoices vs. past due invoices

While all past-due invoices could be considered outstanding, not all outstanding invoices are past due. Let’s look at the difference between the two.

An outstanding invoice is a payment that a customer has yet to pay. As mentioned previously, this could be an invoice that has not met its due date yet, but is still awaiting some form of payment.

A past-due invoice, however, is a payment that a customer has yet to pay and is past the due date listed on the invoice. The past-due invoices can pose a risk to your business and can start to affect your cash flow. Tracking outstanding invoices as they reach their due date is essential to ensuring your customers pay on time, before those invoices become past due.

Why outstanding invoices need to be resolved quickly

If outstanding invoices are left unattended for too long, they can begin to negatively affect your business’s cash flow and financial status. Without the income generated from those invoices, your small business could be at risk of falling behind on its own payments. If supplies and tools were purchased on credit for a particular job, an overdue invoice can cause serious long-term consequences when it comes to your credit standing with current vendors and credit approval from future vendors.

It’s important to keep the lines of communication open between both your customers and vendors. Clearly communicate your payment terms to your customers ahead of time, and, if there is an issue in them paying in full, do your best to create a payment plan for them that will help your business get paid in a timely manner. Additionally, if those issues cause payment issues of your own, communicate where the breakdown is to your vendors and see if payment plans can be an option with them.

Tips for collecting outstanding and unpaid invoices

While outstanding and unpaid invoices can’t be entirely avoided, here are some tips to track down any outstanding payment.

1. Set clear terms

The easiest and most proactive way to avoid unpaid or long-term outstanding invoices is to be clear with your terms from the start. Make sure that the due-date field is clearly specified at the top of every invoice. If you find that you have customers who are frequently late with their invoice payments, you may want to consider adding notes to the invoice regarding the due date and payment terms.

2. Send reminders

Outstanding or overdue invoices don’t always mean that the customer is avoiding paying. With the influx of emails that many of us get, your business’s outstanding invoice email may have gotten accidentally overlooked. With Square, you can schedule professional reminder messages to send a customer regarding the outstanding invoice.

3. Institute a late fee

If you begin to see too many outstanding invoices become overdue, it may be beneficial to implement a late fee with new customers regarding any unpaid invoices that are past their due date. Be sure to include the terms of these penalties in any contracts or agreements with your customers ahead of time.

4. Send an overdue invoice (with a different layout)

While you may have sent your standard branded invoice template with the payment reminders, try changing the look of the invoice once it becomes overdue. This could mean adding a bright, eye-catching color, like red, to the top as a header or a notice. You could also highlight the due date, agreed-upon terms, full amount owed, and any penalties added. An overdue invoice email might just be the urgency your customer needs to see in their inbox to push them to pay.

5. Go analog

We might rely on the digital world nowadays, but nothing can replace a phone call or a physical bill when it comes to collecting those outstanding payments. A full email inbox can often be ignored, but a physical bill to their address or a phone call directly from you can rarely go unnoticed.

6. Offer flexible payment options

Offering multiple payment options for your customers from the start can be a great way to avoid unpaid invoices. Payment options such as a credit card, ACH, and buy now, pay later plans can give your customers the flexibility they need while still ensuring your business is getting paid. If payment upfront or in full is not an option, you can negotiate having your customers set up installments over time while avoiding a total delay of payment.

Worst-case scenario: having to seek professional legal advice. Hiring a lawyer can be costly, so it may be helpful to consider what the total recovered payment would be worth and what type of customer you are having the issue with. A legal professional can discuss additional potential options with you, including taking legal action if warranted. 

Track outstanding invoices with Square Invoices

Within Square, an outstanding invoice is any invoice that is unpaid, overdue, or undelivered. Square allows you to track invoices that are both paid and unpaid, send your customers outstanding invoice reminders, and configure your invoice settings to match your business needs with just a few steps.

With a Square outstanding invoice report, you can see:

Outstanding invoices can pose a challenge for small businesses, especially when your cash flow is tight or your bandwidth is limited. By using some of these tactful tips and integrating beneficial software tools, you can recover those outstanding and unpaid invoices more efficiently and get paid on time.

Paige Newberry
Paige Newberry is a content writer and marketing consultant and has had her work published in Forbes, BBC, CNN, and ABC News, among others. She works with The Glorious Company, a content marketing agency.


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