You’ve sent through an invoice for the hours you’ve worked, so you deserve to be compensated! But what happens when you have outstanding invoices waiting to be paid? How do you get clients to pay without burning bridges?
Non-paying customers and outstanding invoices can be an unfortunate rite of passage for freelancers. This guide will show you what outstanding invoices are, what to do when they are overdue, and how to get clients to pay for invoices.
What is an Outstanding Invoice?
Using invoicing software to keep track of outstanding invoices is the easiest way to keep track of who has paid you and who is dragging their feet.
The Difference Between Outstanding and Past Due Invoices
There is a slight difference between outstanding and overdue invoices.
Where an outstanding invoice is an invoice that hasn’t been paid, a past due invoice is when it hasn’t been paid by the agreed time frame.
Once billable hours are complete, invoices usually have a date that clients need to pay by. This will be different depending on your business model (e.g. within 30 days, on receipt, after 5 working days). However it is important that the due date is agreed upon prior to starting work.
An overdue invoice is when it is time to start following up, and your invoicing software should do this automatically. If the automatic prompt doesn’t work, it might be time to start using the strategies below to get clients to pay.
Effective Strategies to Get Your Clients to Pay Outstanding Invoices
Nobody likes chasing outstanding invoices. However, these strategies for getting clients to pay invoices (and pay them on time!) will help you get paid for your hard work.
Set Clear Terms
The first line of defense for outstanding or overdue emails is to have a signed client agreement. Before you start working, send through an agreement that states
- How much you charge per project/per hour
- Whether you require a non-refundable deposit
- The estimated price and timeline
- What happens if extra expenses crop up
- How they can pay you and when (including fast and flexible client billing options can increase chances of getting paid on time)
- The consequences of not paying on time
This way, both you and the client are on the same page before starting. Of course there is always a chance that you will still run into slow paying clients (every business runs into this eventually!), but you will at least have the signed agreement to back yourself up.
Send a Friendly Reminder
It is always good to give clients the benefit of the doubt. Maybe they missed your invoice email. Maybe they have a family emergency. The software you use to track invoices should automatically send out a friendly reminder when an invoice is a couple of days overdue. If needed, you can manually send an email to ask when they will be paying it.
Make the Dreaded Phone Call
If you’re wondering how to get clients to pay invoices, a simple phone call can make a big difference. Your invoice might have been lost amongst emails, or sent to the wrong department for payment. Making a phone call instead of sending endless emails may be the fastest (albeit uncomfortable) way to change an outstanding invoice to paid. Try including phone numbers and best contact people in your client sign up process so you always know exactly who to call to follow up.
Charge a Late Payment Fee on Your Invoices
Your time and work is valuable. Charging a reasonable late fee is an accepted practice that reinforces the fact that you deserve to be paid for your work in the agreed timeframe. So that you don’t run into any issues, your late payment fee policy must be stated in writing prior to working together, and can be added to the bottom of any invoices you send through (many invoicing software solutions include outstanding payment policies). There are different laws around how much interest you are allowed to charge for late payment so don’t forget to look up any state or federal laws!
Cut Them Off Until Outstanding Invoices are Paid
Your client agreement should cover any consequences of not paying outstanding invoices. Like late payment fees, ceasing work until the invoice is paid is a relatively accepted practice. For big, extended projects or new clients, you might want to consider working to milestones and/or take a deposit so that you don’t complete a whole lot of work and have zero money to show for it. Your methods for budgeting in project management are all part of growing a business and learning what works best for your type of freelancing work.
Hire a Debt Collector
Sometimes chasing invoices isn’t worth your time or energy. For outstanding invoices that drag out, you might want to consider using a debt collector. This should be a last resort method, used only after you have exhausted the above methods (they might have honestly missed your invoice or need a couple of extra days!).
Take Legal Action for Nonpayment
Some outstanding payments may require legal action for nonpayment. If you are lucky, you won’t have many or any clients that require this level of intervention! Depending on the value of the claim, you may be able to go through a small claims court or submit online claims yourself (e.g. for an invoice less than $10,000, country dependent). The bottom line is that you deserve to be paid for your work, and keeping a paper trail of all work completed with a time tracking software, client conversations and signed agreements are your best defense for legal action.
Try Fast and Flexible Client Billing With MinuteDock
These strategies for dealing with unpaid invoices will help you communicate with clients more effectively, grow your business and ensure you are compensated for the work you do. However, you might still run into clients with outstanding invoices (these things do happen). With MinuteDock billing software, you can track invoices, outstanding payments and set up clear payment terms. Stop chasing clients and start getting paid with MinuteDock!