“The customer’s perception is your reality.” – Kate Zabriskie

According to The National Federation for Independent Business (NFIB), 64 percent of small business owners have unpaid invoices that are over 60 days old.  Late payments can make or break a small business, so tackling overdue invoices is imperative.

If you have a billing and invoice software, it’s likely not your fault that your customer hasn’t paid in a timely fashion. You may never know the full reason why a customer payment is late. They may actually have a very valid reason, which is why it’s important to approach the situation in a friendly (but firm) manner.

Based on our conversations with top field service professionals, here are the key steps to take to get those overdue invoices paid:

1. Develop a procedure

Make sure that you’re checking your receivables every week so that nothing is falling through the cracks. Having a system that integrates with your accounting platform will allow you to do this with very little effort. Create a procedure with specific timeframes for following up with late customers. It’s recommended to at least send written follow ups at the 14, 30, 60 and 90 day marks.

2. Send written reminders

It’s always best to keep a written account of all of your attempts to reach out to the customer. Written reminders can be sent via email or regular mail. The written reminder should be empathetic, but stern, reminding the customer that you’ve provided a service for which you should be compensated. Reminder: always keep a copy of the reminder in your files if you’re sending it through regular mail. This documentation may come in handy later.

3. Follow up with a friendly phone call

It is never guaranteed that your email or regular mail will be opened or read. Reaching out to your customers via phone is a great next step, but it’s recommended that you call no more than 3 times if the customer is unresponsive. Always leave a voicemail and provide excellent customer service. Perhaps the customer isn’t happy with the way the job was completed. These are important details to find out and could be clues as to why the customer is holding back. Again, there’s no guarantee that the customer will 1) answer, 2) listen to your voicemail or 3) respond, but it’s still a necessary part of the process. Don’t forget to document your attempts and keep all of your documentation in the customer’s file. If you have a field service management tool, the software should keep a log for you.

4. Offer assistance in a friendly manner

Never assume your customer isn’t paying you because they simply don’t feel like it. Emergencies come up and life happens. Show them you empathize with them and that you want to work with them to get their bill paid off in a timely manner that works for them. Offer a customer payment plan and give them a couple of options so they still feel free to make a choice.

Dear Mrs. Jones,

In March, you hired our company to perform work on your home. We’re concerned because there is an overdue balance of $789 on your account for the completion of this job.

We enjoyed working with you, and want to continue working with you in the future. If you are having trouble paying your bill, please give us a call at 888-555-4567. We have payment options available that may work well for you.

Regards,

Henry’s HVAC

5. Demand Payment

Resort to this after five attempts to get in touch with your customer. At this point, it is more than likely they’ve received and understood one or more of your messages. It’s generally a good idea to get a little more firm in your approach at this stage in the game. It’s important to remember not to get angry with a client or send out threats. Because the client is late in paying, you may be able to get more than you had originally closed on. Let’s say the client approved an estimate for a job that was $15,000, put down a $5,000 deposit and agreed to pay you the rest in a lump sum when the work was done. The client now owes you $10,000, but the client has had some unexpected expenses come up and is unable to hold their end of the bargain. You could offer them a 24 month customer payment plan of $450 which would equate to an additional $800 (or 8% interest on the original amount). If the client remains unresponsive, continue to step 6.

6. Announce intentions to take more aggressive action

If you’ve done everything you can to work with a client who is unable to pay their bill or is simply unresponsive, it may be time to consider other options. You could either take your client to court or hire a collection agency. Both avenues could be costly and there’s no guarantee you will get good results. Hiring a lawyer and going to court could cost you thousands and result in a lesser settlement than what you’re owed, while a collection agency will take a percentage of your earnings (usually anywhere from 20-40%) once they’ve caught up with your late client. Sending a letter announcing your intentions of taking legal action could be enough to scare your client into paying, but it’s never a good idea to make threats. Simply make them aware of the choice you’ve made and give them one last chance (in the form of a deadline) to pay you before taking action.

Wrap Up

In the end, there’s no guarantee you will be successful after chasing a client who refuses to pay. It’s best to find out if 1) the client was unsatisfied with your performance and b) if they are struggling to pay the bill before taking any serious action against them. Handling the situation in a friendly and professional manner is always the best approach to maintaining a strong business over the long term.

Last modified: July 28, 2017