Limiting Unpaid Invoices

Whenever you begin a working relationship with a customer or client, there is an expectation that they’ll be able to pay you when billed for your services. Unfortunately, you may find yourself in a situation where your client is unable or unwilling to pay their bill for any number of reasons.

There are legal steps you can take to claim your unpaid invoices, but the process can often be long and convoluted. You may be able to claim unpaid invoices when you file your taxes, but be sure to check with a professional.

The best cure for the unpaid invoice blues is through prevention. There are some tricks you can implement to ensure that your invoice is paid on time and in full. Follow these tips to save yourself some grief later on:

1. Halt services. This may seem obvious, but it’s astonishing how many people continue offering their services to customers or clients when they have an outstanding bill. Remember though, not everyone is out to rip you off, so allow for an appropriate amount of time from billing to receive payment. It’s one thing to continue to work for a client while awaiting payment, it’s entirely another to continue working for them when it’s clear they cannot or will not make payment.
2. Charge up front. If your customers or clients are comfortable making full or partial payment up front, then you’ll guarantee yourself something for your effort. One method used by some contractors is charging up front for their estimated time or materials then charging the balance upon delivery of their products or services. This guarantees that you won’t come away empty handed.
3. Make payment convenient. It’s incredible how many invoices are paid late just because it’s a hassle for customers or clients to make a payment. If you have a website or do a lot of work remotely, consider setting up a PayPal account or accepting credit card payments through your site. If you mail invoices to your customers or clients, include a pre-paid envelope for them to send payment in. Anything you can do to make payment easier on your customers or clients will probably ensure that you get paid quicker.
4. Charge late fees. There’s some debate as to whether it’s professional or not to charge a late fee on unpaid invoices, but so long as it’s agreed upon before work commences it’s legal. In most cases, a late fee does little more than act as a warning or deterrent so it’s not necessary to charge anymore than a nominal fee.
5. Hire a collection agency. If you’re uncomfortable, unwilling or unable to personally collect payment from a customer or client, you should consider hiring a professional collection agency. Collection agencies not only lend urgency and legitimacy to your payment requests, but they can also help you with returned funds and bounced checks.

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