Why Have You Got So Many Unpaid Invoices?
A US Bank study suggested that 82% of businesses fail due to cash flow management issues. And most businesses face cash flow issues because their clients and consumers don’t pay them on time.
Source: Pexels
Unpaid invoices are a major issue for most small and medium businesses (SMBs). Further, most businesses have no idea why their clients aren’t paying.
If you’re playing the guessing game, here are some proven reasons why you have unpaid invoices, along with how to get them paid.
Types of Non-Paying Clients
For freelancers and agency businesses, clients are only of two types: clients who pay on time and clients who don’t. But non-paying clients could be further classified into the following categories:
Don’t Have Money: This often happens when you deal with startups and small businesses. Due to cash flow issues, they may not be able to pay on time. Or, they may not have the right payment methods to clear your invoice.
Dissatisfied: Freelancers often encounter dissatisfied clients. No matter how hard your work, some clients will not like your work. And as a result, they won’t pay. With such clients, there’s not much that you can do. A good way is to collect the payment upfront, if possible.
Delinquent: These clients plan beforehand that they won’t pay you. They have poor communication etiquette, and they disappear as soon as the payment date comes near. Take these clients as a red flag, and ensure that you steer clear of them.
Source: Payoneer
Why Your Clients Aren’t Paying on Time?
Not all clients are fraudulent. They want to pay you on-time so that they can have a fruitful relationship with you. But sometimes, late payments can happen. Your client may not have the cash-in-hand, or maybe there was a workflow-related issue.
But if you have unpaid invoices piling up, it could be a sign of worry. And, here are a few reasons that you need to check out.
1. You’re Sending Invoices to the Wrong Person
In many cases, the actual client working with you isn’t the person who clears invoices. This issue is common when you work with bigger companies that have various departments.
To resolve this issue, discuss the payment terms with your clients beforehand. Ask them about details like who’s in charge of invoices and how to contact them.
2. They Don’t Have the Money
Cash flow issues are a part of any business. Your client may have incurred a big financial loss, or they may have made a big purchase. As a result, they may be short on funds. If this happens once in a blue moon, it’s fine.
But if it becomes a trend, talk directly to the client. If they really want to pay, you can convert the due invoice amount into smaller installments.
3. They Keep Forgetting
Clients can be difficult; they really can. If you’re working with a big company, paying you on time would be the last on their to-do list. Getting paid as a freelancer might be a big deal for you, but it isn’t for your client. To deal with such clients, make a habit of following up more often.
You can use a recurring billing and invoice system like MoonInvoice to send automatic payment reminders to your clients. You can set two dates: two days before the final due invoice date and immediately after the final due invoice date (if they miss the final due date). This way, you won’t need to chase your clients for money every time they forget to pay.
4. They Didn’t See Your Invoice
Again, this happens a lot when you work with big clients. If they’re overwhelmed with work and have an overflowing inbox, they’ll likely miss your invoice. Keep in mind that they want to pay you, but they don’t know you’ve sent them the invoice.
To overcome this, create invoices that stand out. Ensure that your invoice looks different from other documents and is easily recognizable. The best way to make your invoices unique is to use free professional invoice templates. These templates allow you to create stunning invoices that can’t go unnoticed.
5. Unclear Invoice Terms
Inconsistencies in invoice terms are one of the major causes of unpaid invoices. An IOMA survey revealed that up to 3.6% of invoices have errors.
Let’s say you accept card or online banking only, but your client uses PayPal. And since you didn’t mention the payment terms clearly, the client isn’t able to pay.
Source: PayPal
Or maybe you didn’t include any late payment penalties. So the client isn’t aware of late payment consequences. Therefore, it’s critical to clarify payment terms before signing a contract. Discuss essentials like the accepted modes of payment, the date of issuing the invoice, the final due date, late payment terms, etc.
Also, mention all these details again on your final invoice. By using an invoice app for windows, you can customize your invoices and include payment terms on all of them.
6. They Don’t Want to Pay You
As discussed, some clients just don’t want to pay you. They may not have liked your work, they may not have the funds, or they’re essentially delinquent. In such cases, even the best recurring billing and invoice system won’t help.
For such clients, try requesting them politely to pay the invoice. You could also offer them incentives or rewards for paying on-time. But if nothing works and your clients aren’t ready to pay you, you might need to take legal action. You can send them an “intent to sue” letter, threatening them to drag them to court if they don’t pay.
But remember, if legal action will be taken, a substantial amount of time and money will go in. So, go for it only if all the other doors are closed.
Wrapping Up
If genuine clients fail to pay you on time, it could be because of inconsistencies in your invoice. To avoid invoice errors, always use an invoice app for Windows like MoonInvoice when creating and sending invoices.
But some clients just don’t want to pay. Watch out for such clients and ensure you steer clear of them.
Source By: https://www.mooninvoice.com/blog/why-you-got-so-many-unpaid-invoices/
