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Strategies for Collecting Outstanding Invoices

Collecting outstanding invoices can be a challenging task, there are several strategies you can employ to improve your chances of getting paid.

The words outstanding and overdue are used interchangeably, so what’s the difference?

Outstanding means your client has not paid for a service but they are yet to cross the deadline to do so.

Overdue means your client has not respected their payments terms and paid for a service. The deadline to do so has now passed. This is also known as a past due invoice.

Most companies wait until an invoice is overdue before taking any action at all. But why not be proactive? Here are some effective strategies for collecting outstanding invoices:

Make it Easy for Customers to Pay You

This may seem like it’s common sense, but it is sometimes overlooked. Make it easier for your clients to pay by offering multiple payment options such as credit cards, bank transfers, or online payment platforms. Provide clear instructions on how to make the payment, including any necessary account details. Accepting online payment for your goods or services helps you reach a wider audience and keep the customer experience running smoothly. Save time and money with business invoicing software. Sage reduces time spent invoicing clients, chasing payments, and processing finances.

Set Expectations with Clear and Transparent Communication

Establish a clear and open line of communication with your clients from the start. Clearly communicate your payment terms, due dates, and expectations. Send reminders well before the due date and follow up promptly if payment is delayed.

Invoice Reminders

Send friendly reminders to your clients as the due date approaches. These can be in the form of automated emails or personalized messages. Include all relevant information such as invoice number, amount due, and due date.

Personalized Follow-Up

If the payment becomes overdue, reach out to your clients personally via phone or email. Politely inquire about the status of the payment, confirm that they received the invoice, and ask if there are any issues or concerns causing the delay.

Negotiate Payment Plans

In cases where clients are facing financial difficulties, consider negotiating a payment plan that allows them to pay in installments over an agreed period. Ensure the terms are realistic and reasonable for both parties.

Late Payment Penalties

Include late payment penalties or interest charges in your payment terms and clearly state them on your invoices. This can serve as a deterrent and encourage timely payments.

Escalate the Matter

If all attempts to collect payment fail, escalate the matter by sending a formal demand letter or engaging a collection agency or a lawyer specializing in debt collection. This step should be taken as a last resort after exhausting all other options.

Maintain Accurate Records

Keep detailed records of all invoices, payment due dates, and communication with clients. This documentation will be helpful in case legal action becomes necessary or for tax purposes.

Building Strong Relationships

It's important to balance firmness in collecting outstanding invoices while maintaining positive relationships with your clients. Cultivate strong relationships with your clients by providing excellent service, being responsive to their needs, and maintaining a professional demeanor. This can encourage timely payments and open lines of communication.

At CPA By Choice we can regularly review your invoicing and payment collection processes to identify any bottlenecks or areas for improvement. Streamlining your processes can help prevent delays and increase efficiency. We also understand that accounting can take you away from your day-to-day activities in your business and we would love to help you have more time for the things that matter to you. We are available to answer your questions, feel free to call us or send us a message.


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