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Best Ways to Chase Unpaid Invoices in NZ
Updated on June 8, 2022
Reading time: 5 minutes
No matter the size or experience, all businesses will at some point have to chase unpaid invoices. It is an unfortunate and occasionally awkward part of running a business. However, some things can make chasing invoices easier. This article will outline tips to ensure your business gets paid while maintaining its reputation and positive customer relationships. These tips include:
- ensuring that you have transparent processes in place to chase invoices;
- prioritising maintaining customer relationships;
- being flexible for those in financial strife;
- offering a discount; and
- seeking out a professional collector if need be.
Have a Straightforward Process in Place
It is vital that you keep comprehensive records of all invoices you send out and when they are due. You should also clarify when invoices are due when you send them out.
When invoices become overdue, you should have a set process to deal with them. Importantly, you should follow up as soon as possible when an invoice has become overdue. The longer you leave an unpaid invoice, the easier it is for a customer to ignore you.
In the early stages, you should be brief and polite. It is important to factor in that your customer or client may have simply made a mistake. Indeed, it is best to remain friendly and professional before jumping to conclusions like your customer is trying to rip you off. When you chase an outstanding invoice, you could also send customers an outcome report to remind them that they have paid for excellent services.
Prioritise Maintaining Customer Relationships
It can be hard to maintain positive client relationships while chasing invoices. People can become uncomfortable and quick to anger when you pursue them for money. Therefore, while chasing invoices, you should also aim to preserve customer relationships. If your business is small, you may be the only employee. Therefore, you will be stuck chasing invoices while also trying to maintain customer relationships. Therefore, you could consider creating a separate work email account that manages finances to ensure that your positive working relationship is separate from any chasing you have to do.
Be Flexible to Those in Financial Strife
If you are invoicing someone in financial strife, you may want to take a different approach. They likely want to honour the invoice but do not have the means to pay you. Alternatively, you could offer a payment plan to allow them to pay you back over time. This will enable you to maintain your relationship with them so that they hopefully use your services again when they are experiencing better financial stability.
Offer a Discount
If you are in severe strife and your business needs cash flow but has several unpaid invoices, you may have to provide a discount. Perhaps you could give a 15% discount on invoices for payment. Additionally, even if you are not in dire financial straights, you should still not continue to funnel resources into a client who cannot pay you. You should ensure that you have a plan to recognise when you should shut off services that you are not being paid for.
Additionally, if you do not end up with the money from the invoice, you will need to write off income in your accounts. This is especially important if you have already paid tax on the money from the invoice. You will be able to claim back this tax.
Seek Out a Professional Collector
Eventually, you may need to seek out a debt collector or lawyer to chase your unpaid debts. You can also file in the District Court to ensure that the invoice is paid, but court time is costly and will likely be more than the cost of the invoice. You can go to the District Court if there is a dispute about invoicing, but they cannot act as a debt collector. This will likely wholly sever your relationship with the client, so make sure you exhaust other options before commencing legal proceedings.
Key Takeaways
As a business owner, it is always an awkward experience when you have to chase unpaid invoices. You should ensure that you have a good process in place when seeking the payment of invoices and make sure that you prioritise customer relationships.
If you need help to chase unpaid invoices, our experienced disputes lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 0800 005 570 or visit our membership page.
Frequently Asked Questions
How long should I allow for invoices to be paid?
This depends on you and how you want to run your business. You may want to make them due a month – 30 days – after you send them out, or even a week if you want the payment to be sooner. There is no set rule, but you should clearly communicate it to your customers.
What should I do if someone hasn’t paid me after several attempts to contact them?
You can contact a lawyer or debt collector to follow up with the customer. Or, you can contact the District Court to get them to make an order for payment. However, this can be an expensive process that will likely cost more than the debt you will collect.
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