Accounts receivable (or debtors) are a large part of your working capital and can significantly impact your cash flow if you have overdue invoices.
Collecting overdue customer invoices can be frustrating and time-consuming, but it is essential to running a successful business. If you have customers who are consistently paying their invoices late, it can have a negative impact on your cash flow and bottom line.
Here are six tips to help you effectively collect overdue customer invoices:
1. Set clear payment terms
Make sure that your payment terms are clearly stated in your terms and conditions, quotes or proposals, as well as on your invoices. Also, include the due date and any late fees that may be incurred. Setting clear payment terms can help prevent misunderstandings and encourage timely payment.
2. Follow up promptly
If a payment is overdue, follow up with the customer as soon as possible. The sooner you follow up, the more likely you will receive payment.
Most accounting and invoicing software allow you to use automation for these payment reminders. The reminders can be sent via email or text message and be customised to be sent at regular intervals until the invoice is paid. This can help ensure that customers are reminded to pay their invoices and can help ensure payments are noticed.
There is also specific software like Chaser or Debtor Daddy that specialises in collecting your overdue debtors.
3. Offer payment options
Consider offering your customers multiple payment options. This can make it easier for customers to pay their invoices and may encourage them to pay on time.
Payment options include bank transfer (ETF), credit card, PayPal, BPAY, and buy now pay later apps. Whilst offering a range of options is excellent, you need to be mindful of the fees associated with each type of payment. Alternatively, you can charge a surcharge to a customer or include the cost in your pricing model.
4. Negotiate payment plans
If a customer is having difficulty paying their invoice in full, consider negotiating a payment plan. This can help you receive at least a portion of the payment while allowing the customer to pay off their balance over time.
5. Use a collections agency
If you are unable to collect an overdue invoice after repeated attempts, consider hiring a collections agency. Collections agencies specialise in recovering outstanding debts and can effectively get your customers to pay their unpaid invoices.
E-Invoicing is a way to exchange invoice details through software using a secure network automatically. One of the significant benefits of e-invoicing is that many government departments have reduced their payment terms to 5 days for invoices received via e-invoicing.
You can read more about e-invoicing in our article here.
Following these tips can effectively collect overdue customer invoices and improve your business’s cash flow.
If you are providing credit terms to customers, having a good legal set of terms and conditions that protect you is essential. Some other documents and considerations include:
- A credit application (so you have all the relevant details in case you need to rely on a collection agency
- Director guarantees
- Registering a security interest
Cash flow is the lifeblood of a business, so ensuring you are collecting your debtors in an easy and timely manner is essential.
Are you struggling with collecting overdue debts and managing your cash flow? We can assist you in setting up efficient processes for collecting outstanding debts and improving your overall financial management.
Our services include:
- Developing a plan for managing and collecting overdue debts
- Identifying and addressing any bottlenecks in your current debt collection process
- Providing regular financial reporting and analysis to help you stay on top of your cash flow
- Working closely with you to establish clear payment terms and follow-up protocols
- Assessing and implementing automation tools to streamline the debt collection process
Don’t let overdue debts continue to weigh on your business. Contact us today to book a discovery call and see how we can help you take control of your finances and improve your cash flow. Together, we can create a customised plan to help you collect overdue debts, improve your financial management and achieve your business goals. Let’s take action now!
There has been a lot of hype in the media regarding eInvoicing lately, so what is it and how can you use it in your business to save time and money?
What is eInvoicing
eInvoicing or Electronic Invoicing is a way to automatically exchange invoice details through software using a secure network.
The system only works between businesses and not with consumers.
Why it was introduced
It is reported that more than 1.2 billion invoices that are exchanged in Australia every year, with around 90% of these invoices being processed manually to some degree.
The ATO has calculated that on average, paper and emailed PDF invoices cost between $27 and $30 to process. eInvoicing enables process automation and reduces costs to less than $10 an invoice. With more than 1.2 billion invoices, the cost savings to businesses, governments, and industry as a whole can be huge!
The true cost saving, however, will only be unlocked with the widespread adoption of eInvoicing.
The role of the ATO Role
eInvoicing in Australia is being delivered via the Peppol network. Peppol is an international eProcurement framework developed and maintained by OpenPeppol.
In 2019, the Australian Government adopted the Peppol framework and established the ATO as the Australian Peppol Authority to develop and administer the framework in Australia.
The ATO does not receive a copy, nor is able to view the contents of any eInvoices being transmitted between businesses.
The benefits of eInvoicing include:
- more accurate invoices, resulting in fewer mistakes to chase up and correct
- reduced time and costs dealing with manual processes including fixing invoice errors
- no more lost invoices – save time by getting the right information to the right contact on time
- confidence in the security of the Peppol network – less chance of invoice fraud or scams
- faster payments
- better business decisions, based on correct, real-time financial information.
Is eInvoicing secure?
According to the ACCC’s Scam Watch, Australian businesses lost nearly $128 million to business email compromise scams in 2020.
eInvoicing can help keep your business safe by:
- using a channel that offers stronger security controls than email, such as encryption
- reducing the risks of fake, unsolicited or compromised invoices and other false billing scams
- exchanging eInvoices through the network of approved service providers, called access points, who implement security controls to prevent, detect and mitigate the risk of invoice fraud
- using your trading partners’ ABNs, which are validated, to ensure invoices are sent to legitimate businesses
- preventing lost or delayed invoices.
How to get paid fast with eInvoicing
If you are transacting with Commonwealth, State, Territory or Local government agencies, are in various states of adopting the technology. It has been mandated by both the Commonwealth and NSW government agencies. These agencies are also paying eligible eInvoices within 5 days or are paying interest on late payments.
How eInvoicing works
The system can be used to both send and receive invoices. There are currently 22 registered service providers in Australia. The full list of eligible products can be found here.
eInvoicing to receive invoices
By receiving eInvoices, it replaces much of the data entry, however, it does not replace your approval process or payment processes. You still remain in full control of when and how your invoices are paid.
eInvoicing to send invoices
The process relies on verified ABN details to identify businesses that are registered.
You will need to ensure that your customer’s ABN is recorded against the contact. You can use the Peppol directory to see if your customer is registered.
If you are using an add-on to your accounting software for your invoicing like ServiceM8, you will need to check with them on their roll-out plan for eInvoicing.
eInvoicing with Xero
Xero is a registered service provider to send and receive eInvoices.
Instructions for Xero users to:
Register for eInvoicing
eInvoicing with QuickBooks
QuickBooks has partnered with software provider Link4 to enable eInvoicing capabilities.
To find out more about Link4 and to activate the app, see Link4.
If your suppliers aren’t yet using eInvoicing, you can utilise software like Hubdoc or Dext to help your process invoices effectively and efficiently to reduce costs.
For more information on eInvoicing or how to implement it into your business, book a discovery call today.