Outstanding invoices? Follow these steps and get paid on time

Sending payment reminders is an essential part of invoice management. But how do you handle outstanding invoices? In this blog, we explain how and provide handy tips to ensure your cash flow isn't put under pressure.

What is an outstanding invoice?

An outstanding invoice occurs when a client does not pay within the agreed payment term, usually 14 or 30 days. Once the payment term has expired, action is required on your part. The sooner you act, the greater the chance you will receive your money.
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💡 Tip for TimeChimp users: set the default payment term via the settings. Overdue invoices automatically appear in the column for expired invoices.

How do you prevent outstanding invoices?

The best-case scenario? No outstanding invoices. With these measures, you can encourage clients to pay on time:
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1. Clear payment terms

Make your payment terms clear and state them explicitly on your invoice. Consider:
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• Payment term:
  Invoices must be paid within 14 days of the invoice date.

• Late payments:
  In the event of late payment, interest of 1% per month will be charged.

• Payment methods:
  Payments can be made via bank transfer or iDEAL.

2. Request a deposit

For large projects or new clients, you can request a deposit. This reduces risk and encourages timely payment.

3. Regular communication

Stay in touch with your clients via email or phone. Good relationships often lead to faster payments.

4. Use payment portals

Make paying easy with online payment options. Clients can pay directly via a link, which speeds up the process. Read here how to set this up in TimeChimp.

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Sending an invoice reminder

Sending a reminder for an outstanding invoice doesn't have to be difficult, as long as you handle it professionally. It all starts with the first invoice reminder. This is your chance to politely point out the payment to your client without being too pushy.
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Why does an invoice reminder work?

Often, an invoice reminder is all it takes to prompt a client into action. People sometimes simply forget to pay, or the invoice may have gotten buried in their inbox. By sending a quick and clear reminder, you give them a friendly nudge in the right direction.
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For example: send an email with a subject line like "Reminder: Outstanding Invoice" and use a professional yet friendly tone. An example invoice reminder can be as simple as:
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Dear [Billing Contact Name],
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We recently sent an invoice for [description of service/product]. To date, we have not received payment. It may have simply slipped your mind. Could you please transfer the amount of €[X] by [date]?
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If you have any questions, please feel free to contact us.
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Get more out of your invoice reminders

Use an invoice reminder that fits your tone and style. This saves you time and ensures consistency. Many companies choose to use a template so that every team member communicates the same message. An example invoice reminder or template also helps you ensure you don't forget anything important, such as payment details and a clear deadline.
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💡 Tip for TimeChimp users: You can also make use of placeholders, such as [Name], [Invoice number], and [Amount]. This makes your reminders not only professional but also personal.
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When should you send a formal demand?

Sometimes a reminder isn't enough and you need to take it a step further. This is the moment to send a formal demand. But when exactly should you do that? Timing is crucial here.

The right moment for a formal demand

It is wise to only send a formal demand after you have sent at least one or two invoice reminders. A formal demand can quickly sound quite stern and may strain your relationship with your client. Therefore, ensure you have exhausted all informal options first.
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For example:
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1. First invoice reminder: Send 5-7 days after the due date.
2. Second reminder: Send approximately two weeks after the first reminder.
3. Sending a formal demand: Still no response after 30 days? Then it is time for a formal demand.

Ensure an effective and professional formal demand

A strong formal demand is clear and businesslike. Use a sample demand letter to find the right tone. Always include:
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• The original invoice number
• The outstanding amount
• The final payment date
• Potential next steps (e.g., collection costs)
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A payment reminder for an invoice could look like this:
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[Name],
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Despite previous reminders, your invoice number [12345] dated [date] has not yet been paid. We kindly request that you transfer the outstanding amount of €[X] within 7 days.

If we do not receive payment, we will be forced to take further action.
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💡 Fill in the settings of your TimeChimp environment with the standard reminder and dunning templates for invoices. This ensures that communication from all employees is consistent.
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When should you hire a collection agency?

It is frustrating when a client does not pay an invoice or pays late. Fortunately, you can handle this in a structured and effective way. Below are the most important steps to take so that you can act quickly and in accordance with the law.
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Step-by-step plan for non-payment
By following these steps, you remain professional and ensure you are on solid legal ground when collecting an outstanding payment.
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• Only hire a collection agency as a last resort
  You should only hire a collection agency if the client continues to refuse payment after multiple reminders.
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• Send a mandatory payment reminder
  Before taking further steps, you are required to send at least one clear payment reminder or formal notice to the customer.
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• Provide insight into additional costs
  State in the formal notice which collection costs you will charge if payment is not received.
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• Set a legal payment term
  Give the customer at least 14 days to settle the invoice. This is a legal requirement.
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What if your customer still hasn't paid?

If payment is not received after the set deadline, you can engage a collection agency. In that case, the customer is responsible for both the outstanding amount and the collection costs.
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By communicating clearly and taking the right steps, you ensure your approach is both effective and legally sound. Want to know which rules apply? Read the requirements for engaging a collection agency here according to the national government.
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Financing outstanding invoices

An outstanding invoice can significantly hinder your cash flow. Fortunately, even if customers don't pay, you can keep your business running by using invoice financing. This helps you access your money faster and creates financial breathing room.
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What is invoice financing?

With invoice financing, you get quick access to cash. An external party pays a large portion of your invoice immediately and takes over the collection from your customer.

Benefits

• Fast payment: No long waits for payments.
• More focus: Focus on growth, not on debt collection.
• Extra financial breathing room: Use the funds for investments or daily expenses.

Tips for a smooth process

• Submit correct invoices: Ensure they are complete and legally compliant.
• Be clear: Clear payment instructions prevent delays.
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This is how you get paid faster and keep your business running smoothly.
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Is invoice financing right for you?

Invoice financing is ideal if you regularly deal with customers who pay late, or if you temporarily need extra working capital. It offers a quick solution to liquidity problems, but it also comes with costs, such as a percentage of the financed amount.
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Before choosing this option, it is important to compare the terms and conditions of different providers. Determine whether the benefits of immediate liquidity outweigh the costs and choose a reliable partner that fits your business needs. This way, you maintain control over your finances and can continue building the future of your company with confidence.
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Conclusion

Unpaid invoices remain a challenge, but with a smart approach, you can stay on top of them. From preventive measures and clear invoice reminders to sending formal demands and financing outstanding invoices: there is always a solution. Choose what fits your situation.
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Try TimeChimp for free for 14 days here and discover how it can help you with efficient invoice management and dealing with unpaid invoices.

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