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Make overdue invoice emails the exception - not the norm

Make overdue invoice emails the exception - not the norm

Late payments cost global businesses upwards of $3 trillion, according to a recent economic study from Sage. This same study found that a whopping 1 of 10 invoices isn’t paid on time, and 10 percent of payments owed are never paid - eventually making it to the bad debt pile.

In order to get paid, businesses are spending 10 percent (or more) of their time managing the invoicing process, according to customer data analyzed by Xero. That includes generating invoices, sending them, and tracking down late payments. That’s quite a big chunk of time for any business!

So how do businesses try to collect on invoices that go unpaid? For many, the first step is writing and sending an email message, reminding the customer that the payment is outstanding and due immediately. But unfortunately, the story doesn’t end there, as repeated follow-ups often get no response (or subsequent payment).

The most effective thing businesses can do to reduce late payments is to eliminate the need for overdue invoice emails wherever possible.

Don’t rely on them as your only (or primary) strategy for dealing with late payments. Take a 360-degree view of your business to attack late payments from all angles, using incentives, automation, and upfront deposits. Think about how to encourage on-time payments before you ever send your first invoice.

Consider how you structure your pricing. Many businesses allow customers to purchase products and services on credit, which increases the likelihood of overdue invoices. In order to remedy that scenario, ask yourself what types of payment terms could you tack on to incent on-time payments. Here are just a few ideas:

  • Offer customers a discount if they provide a credit card (rather than a mailed check) to be billed at predetermined times.
  • Require either a partial or full upfront payment.
  • Consider discounts for early or on-time payments (regardless of payment method).
  • Outline late fees to be charged if payments slip beyond a specific time window.
  • Give away a coupon for a free product or service for a certain number of on-time or early payments.

All these factors will need to be clearly spelled in each customer’s contract or terms and conditions, before they enter into a relationship with your business. But, if it’s something you’re coming to after you have a large customer base, you can always go back and ask them to agree to new terms.

And don’t forget a critical component to make this work: the billing or invoicing platform you use must support these different types of logic in an automated fashion. Otherwise you (or your employees) will be doing all the work manually.

Think about ways you could help reduce late payments while they are happening. When you send out that overdue invoice email, what types of options could you offer that might incent your customer to make the payment rather than ignore the email?

Let customers know that they have multiple options to pay their balance. They may not know that you accept PayPal, or they just got so used to mailing in a check that they forgot about their new corporate credit card. Look at the business case for payment plans. If you want to keep customers no matter how long it takes them to pay, you could present them with a payment plan option to at least receive a partial payment. Decide if some sort of account “pause” option makes sense for your business. If you’re in a service-based business, it may work to allow customers to place a hold on their account until they can pay in full.

The same goes for these options - you’ll only be able to provide multiple payment options and/or payment plans with automated functions from your billing and invoicing provider. Otherwise, you’re left to keep track of complex billing arrangements by hand.

Look for patterns in customer behavior that might help you improve accounts receivable.

Let’s say you start implementing some of these strategies, and you’re seeing mixed results. Take a further look into your invoicing data to see what’s happening.

Are larger purchase amounts generating longer past due invoices? Take a look at your slowest payers to find out. As a stop gap, consider proactively offering those customers payment plans. For the future, evaluate changing your payment terms by requiring a credit card for any purchases over $1,000, or other appropriate benchmark.

Keep reviewing invoicing data regularly to look for more opportunities to reduce the instances of late payments.

Related: Try these 3 strategies to take action on accounts receivable (A/R)

Now that you have a proactive structure in place, let’s get back to writing your overdue invoice email template.

Write an overdue invoice email like you would talk to your customer.

This is the hardest part for some, but try to think of it this way: if you were calling your customer about this unpaid invoice, what would you say? Let’s say your customer is Sally, and she answers the phone when you call. You’ll probably say something like, “Hi Sally, this is Bob from ABC Corporation. How are you today?” She’ll respond and ask you how you are, and then you’ll move on to the matter at hand - the unpaid invoice.

Sally might say she just put the check in the mail, and you’ll thank her for her payment and wish her a good day. Or she might say that her corporate card expired and she hasn’t been able to make the payment, so you offer to send her a secure link to use PayPal or an ACH transfer. She may even tell you that she can’t pay the invoice in full due to budget issues, and you might decide to offer her a payment plan.

When writing your overdue invoice email, you won’t know exactly what your customer’s response is. So you want to structure the email the same way you’d frame the phone conversation. Stick to the basics here - a greeting, your request, any upcoming action, a caveat (in case payment has been sent), your gratitude, and any special options. And one critical point: leave all emotion out of overdue invoice emails. Just keep it professional, and stick to the facts.

Hi Sally,

I hope this message finds you well. I’m reaching out regarding invoice number 6423 for ABC Corporation in the amount of $2,500, which was due on January 15, 2018. We haven’t received payment on this invoice yet.

Please send payment as soon as possible to avoid a late fee, which will be applied to your account once the invoice is 30 days past due (February 14, 2018).

If your payment is already on the way, disregard this message. Just drop me a note to let me know.

Thank you for the continued opportunity to serve you.

Warm regards, Bob

P.S. Did you know that ABC Corporation accepts credit card, PayPal, and ACH payments? If you’re interested in switching payment methods, you are eligible for a 10 percent discount on monthly invoices. Click here for more information.

The message above looks hand-crafted, right? It can be - but that doesn’t mean you have to send it manually to each customer. Using your invoicing platform, you can create templates that use specific variables. The customer’s name, due date, invoice number, total amount due, and any other invoice-specific data can be plugged in. Then just schedule the messages based on the number of days past due on the invoice.

Related: Write Invoice Emails That Get Paid

Chasing overdue invoices can seem like a requirement of doing business, but it doesn’t have to be that way. By creating a strong invoicing framework that is regularly evaluated, you can minimize the number of overdue invoices to chase - and get back to what you do best.

Want to learn how Invoiced can support your goal to bring overdue invoices as close to zero as possible? Contact us today for a customized demo.

Supercharge your accounting system with an invoicing platform

Supercharge your accounting system with an invoicing platform

When you’re first starting a business, every expense must be thoroughly justified. Most new businesses only spend extra funds on things that are absolutely critical. Instead of purchasing software, you might start out keeping track of back-end financial data and customer invoices manually. Spreadsheets for accounting and templated documents for invoices are fairly standard for small entities.

As your business grows in both size and complexity, it becomes a lot harder to manage accounting and invoicing without some more complex architecture. So you decide to purchase an accounting system to fill both roles, given your budget constraints. And that works for a little while - as long as you have low-volume, simple invoicing requirements.

Related: Accounting vs. Billing Software: the Key Questions You Need to Ask

Your accounting platform may be fantastic when it comes to accounting features. However, it leaves you with few options for invoicing. Maybe the number of invoices is limited, or it doesn’t support recurring billing for your new subscription customers. Or the invoicing process itself isn’t visually appealing, and it doesn’t give the professional look you want to convey to customers.

The thought of having two separate systems for accounting and invoicing may sound like double work. Now you have to run financial data through the accounting system, manage invoicing in the invoicing platform, and manually update the accounting system with invoicing data so you have one system of record. Yuck.

Not so fast: there’s a way to leverage all the awesome functionality of your accounting system AND boost its invoicing capabilities, without duplicating efforts. All you have to do is take advantage of the integrations offered by both platforms for a seamless connection.

Related: Invoiced Partner Integrations

Connecting your accounting system with a robust invoicing platform can support your business’s growing invoicing needs in a number of ways. Here are just a few:

Handle high volumes of detailed invoices

Some accounting systems claim to offer “unlimited invoicing”. That sounds great, until you generate too many invoices for the system to handle. Invoiced customer Flick Electric learned this the hard way. They used an accounting system to generate 6,000-8,000 invoices per week, and their overworked accounting platform crashed.

Invoicing platforms are designed to handle much higher volumes, and will generally offer load tests to prove their capacity. They also allow for a higher level of line item detail on each invoice. If you’re importing detailed data on customer charges, and you’ve got a lot to record, chances are an invoicing platform can handle more item detail with longer character counts.

Related: Flick Electric expands invoicing capacity to 64,000 invoices per month

Access daily billing summaries

Let’s say your new invoicing platform is the system of record for invoices. Using the accounting/invoicing connection, data from the invoicing system gets pushed to the accounting system real-time - and vice versa.

In addition, you can use the invoicing platform’s reporting capabilities to create customized summaries of daily invoicing activity. Easily aggregate the number of invoices issued, payments received for specific invoices (and in total), bad debt written off, email reminders sent, and many more.

That daily billing summary came in really handy for Invoiced customer Immigrant Law Group. Each attorney at the firm required a notification of payments received per attorney that day. Performing this function in their accounting software required extra overhead that was often missed. With an invoicing integration, customers can configure a custom data set (like this one) to be pulled each day.

Related: Immigrant Law Group slashes billing management time by 70%

Take advantage of complex billing structures

Many accounting platforms offer electronic invoicing and accept a handful of payment methods. However, if your business requires more sophisticated invoicing, you’ll likely come up short with an accounting system.

In addition to standard invoicing, an invoicing platform can offer configurable payment plans and subscription billing. Invoices can be customized based on a variety of inputs, like:

  • Non-trivial subscription logic
  • Discounts with expiration dates
  • Prorations and trial periods
  • Auto-scheduled late fees
  • Custom payment terms

And some may offer a variety of payment methods and formats without additional transaction fees. Many accounting and invoicing providers will pass through a percentage fee from the payment processor, and then add their own per-transaction fee. Look out for those, and find one with zero per-transaction fees.

Related: The hidden costs of subscription platforms - and how to avoid them

Make the customer interaction easier

An emailed invoice sent through your accounting system is far more convenient than one sent through the mail. But could you do better for your customers? Invoicing platforms can help you improve the overall customer experience, and sometimes get you paid faster in the process.

Estimate or quoting functionality allows users to create an estimate for customer review and easily convert it to an invoice, keeping the entire interaction with one platform.

Sign-up pages give businesses the opportunity to plug the terms acceptance process right into the invoicing workflow. Instead of asking customers to review and electronically sign a standalone document on an e-signature platform, businesses can configure terms as part of the invoicing process. Invoiced customer DealRoomimplemented sign-up pages and dropped their Days Sales Outstanding (DSO) from 2-3 weeks to 2-3 days.

Related: Customer Spotlight: DealRoom gets paid 80% faster with Invoiced sign-up pages

A customer portal also gives customers one place to find all historical invoices with your business. No more searching through email, or contacting your customer service line to retrieve lost information.

Want to learn how Invoiced can amplify your accounting platform capabilities?Contact us today for a demo tailored to your business.

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