So imagine you have a bunch of outstanding invoices with your customers. Now imagine those are really just like loans that you’ve made to those customers who get to use that money in their business, even though that money really belongs to you. I know, weird right? But it’s true. The moment you remit an invoice you’re essentially saying you owe me money because I did something for you. Whether or not that money is in the bank, under the mattress, or in the vault, it’s technically your money. So the longer it sits in the volcano lair the longer it’s on loan to your customer and unless you’re charging late fees (and who doesn’t love a good late fee?) you’re getting 0 interest on that loan.
So let’s review:
- Money on loan to customer bad.
- Money paid to me good.
So how do we move from the bad to the good column? Well some time outstanding is inevitable, automated payables system might be nice, but the reality is expecting instant payment for everything won’t be happening any time soon. As long as it’s someone’s money you’re after or maybe think about it as your money someone is after it’s going to stay put until the last possible second. It’s not being selfish or greedy or at least we hope not, it’s just that when you don’t have unlimited amounts of it you want to make sure it only diminishes when it must.
So how do we handle this issue, why routine invoice follow up of course! Consistently reminding your client before and after an invoice due date is coming is the best possible way to get paid on time. This can happen all sort of ways:
- E-Mail — The most popular and probably the lowest impact, it can be sent as a nice way to say “Howdy” without feeling like a stick up.
- Phone call — Use this when it’s time to turn up the heat a bit.
- On site visit — Reserve this one for the very serious situations, like before you’re going to go an attorney kind of situations.
However you decide to implement your follow up process the key is consistency, don’t wait until it’s past due to let a client know an invoice can be paid and don’t forget to follow a strict reminder schedule so your client doesn’t feel like the pressure comes in all at once.
The reality is that no one likes being harassed or bothered, but sometimes a gentle push in the right direction is required to get paid on a timely basis. So next time you look at those past due invoices remember those are really interest free loans to your customers that should be paid on time every time.