Last editedMar 20222 min read
Whether you’re running a big business or just starting out as a freelancer, you’ll know that good invoicing practices are essential to keeping your income flowing in. By staying on top of your invoices, you have a much better chance of being paid on time, and therefore having a good cash flow for your business.
But what do you do about outstanding bills? There are times when the client hasn’t paid, and it may be difficult to know how to proceed in these situations. What exactly counts as an outstanding invoice, and what is the best way to handle them? Keep reading to find out more about outstanding bills and how to remind your clients about late payments.
Outstanding payment meaning
It’s a good idea to define what is meant by an outstanding invoice before getting into the best way to deal with them. So what is an outstanding payment? Essentially, this refers to any situation in which the client has not paid the invoice by the due date which you agreed upon.
The outstanding payment meaning may be quite simple to understand, but knowing how to deal with them is another matter.
Establishing payment terms
You can prepare yourself for outstanding bills by setting out the right payment terms when you write the invoice. This actually can help you to avoid late payments, as clients will be more aware of the consequences of paying late and therefore aim to avoid this situation.
When writing an invoice, it’s important to be clear about exactly when payment is due. You can do this by highlighting the due date in some way, such as by formatting the text in bold or using a larger font size. However, it’s even more crucial to set out how you define a late payment, and what the repercussions of this will be.
For example, what is an outstanding payment, exactly? Some companies allow their clients some leeway, permitting them around a week before treating it as an outstanding invoice. You can keep this as an internal rule, as informing your clients of this will create an impression that the due date is flexible and therefore increase the chances of late payment.
In addition, you can inform your clients exactly of how they will be penalized for late payments. For example, you might add a financial penalty that increases depending on how many days their payment is late. This will encourage clients to make payments in a timely way.
Writing late payment emails or making phone calls
When you have a client who hasn’t paid on time, you need to get in touch with them in some way. Phone calls can be a more immediate way to remind a client of a late payment, whereas emails can be better as you will have a written record of the correspondence. For these reasons, it’s probably a good idea to do both.
Should I get a debt collector for outstanding invoices?
When you’re dealing with a late payment, your first port of call should be direct communication with the client. There may be a number of different reasons why they are unable to make the payment on time, and usually it’s fairly simple to reach an agreement about how you can handle this. However, a debt collector may be necessary if you run into long-term issues.
Using GoCardless to deal with outstanding invoices
You can avoid the possibility of outstanding invoices by using GoCardless as your invoicing solution. With a Direct Debit payment system that can collect both one-off and recurring payments, GoCardless makes it easy to get paid on time. After a one-off authorization process where the client provides their details, payments will be automatically transferred to your account on the due date.
You can also benefit from integration with over 200+ partners, including invoicing software solutions such as Xero and Quickbooks.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.