The Top Reasons Why Invoices Go Unpaid and How to Avoid Them
Invoicing customers and then waiting for payment can be a tricky business - will they pay and how long will it take?
Unpaid invoices are a significant issue that most small and large companies have had to face. Knowing why invoices go unpaid and things you can do to avoid that outcome can help ensure that your company doesn't suffer from long-term financial struggles due to late or missing payments. So why do invoices go unpaid? And what can you do to get them paid on time or earlier? Read on for some common mistakes and missed opportunities to make accounts receivable better!
1. Missing Invoices
What do we mean by “missing”? It could mean the customer has yet to receive it, or has chosen to ignore it, or has misplaced it. Whatever the reason, if your customer does not have an invoice for a service rendered or goods delivered, there is potentially no way for them to pay. They may not even remember that they owe you money. Fortunately, there are ways to avoid these situations and ensure that your invoices aren’t getting lost in the void.
Ensure you capture all relevant information from your customer when you issue them an invoice. This includes their name, address, contact information, goods/services being billed for, delivery date, and payment due date. Having all this information on hand makes tracking and tracing the invoice easier if it goes missing.
Another way to avoid missing invoices is by making sure that they are sent promptly. It increases the chances that your customer is expecting your bill. And it decreases the chances that you won’t notice it got lost along the way. Don’t wait for your customer to ask for the invoice, and be happy to give it to them again if they ask!
2. Incorrect Invoice Information
It is essential to ensure that the information on each invoice is correct. Lack of quality control or understanding of the products and services can result in incorrect data from being printed on invoices. This can lead to confusion and delays in getting paid.
One way to avoid incorrect or incomplete invoice information is to double-check all information before sending out the invoice. Ensure that product descriptions, prices, payment terms, delivery dates, and other required details are correct and CLEAR. Take the time to proofread and make sure everything looks accurate and is easy for a customer to understand. Lastly, make sure you find out ahead of time from the customer who the appropriate point of contact is to receive and process an invoice.
3. Unpleasant Formatting
Invoices that are confusing or cluttered with data make it difficult for customers to find the essential information they need to evaluate and process the invoice. This can lead to significant delays in payment or payments not being made at all. This includes making it obvious that what is being looked at is an invoice!
It is essential to include only necessary information on the invoice and present it in an organized, easy-to-read, and understandable way to reduce the chance of delayed payment due to poor formatting. The invoice should display the amount due, payment terms, and most important correct contact information for questions about the invoice. Any other information should be unobtrusive and kept to a minimum.
4. Presence of Billing Disputes
Disputes can arise from various factors, such as discrepancies in what was agreed upon, an invoice error or miscalculation, or a client believing that service or product was not delivered as promised or have come at too high of a cost. To ensure that invoices get paid, businesses should also strive to communicate with clients about costs and billing very clearly in advance and throughout the process. This includes quickly responding to inquiries or concerns that may arise as well as keeping clients updated throughout any service or project.
Unpaid invoices are a common issue that can consume a company’s resources and affect cash flow. Understanding why invoices go unpaid and avoiding those factors as much as possible will help improve the chances of a business getting paid on time or even early. By keeping these tips in mind, companies can minimize the stress and cash crunches that can result when invoices are paid late or not at all.
Following up on past-due invoices is critical! If you don’t have the time or staff to routinely follow up on your invoices, CollBox is here for you! We offer a simple, friendly solution that helps you get paid for your hard work by taking over all past-due invoice follow up (including both emails and real human calls from our team of trained A/R Specialists). Give us a try today and get back to doing what you do best—growing your business!