As a business owner, you must stay one step ahead of financial issues. Unpaid invoices are a common issue experienced by many business owners, one that directly impacts a company’s bottom line. Taking the right steps will improve your chances of receiving the money owed to you, as well as preventing payment problems from occurring in the first place. Litigation is also an option is a client or customer refuses to pay.
Some businesses offer discounts for early payment of invoices. The assurance that an invoice will be paid early is often worth the discounted rate for services rendered. This method is most effective when paired with late payment penalties. Clients will be more likely to make timely payments if they know they’ll be charged extra for being a day or two late.
Sending payment reminders is also recommended. The first reminder should be sent immediately after nonpayment has occurred and should be worded lightly in the event there is an extenuating circumstance cause late payment. If the invoice remains unpaid, subsequent notices can be worded more sternly. After 90 days you might consider sending notice of legal action if the matter isn’t resolved immediately. Your contract should include information on the proper steps to take in the event money is not paid in a certain timeframe.
Mediation is one option to settle nonpayment disputes. In this case, an impartial third party will decide how the matter should be resolved depending on the facts of the case and the details of your contract. You may also take up the issue in small claims court, provided the amount being disputed is under the small claims limit. For amounts over the limit, it’s best to file your lawsuit with the assistance of an attorney.