What Is an Outstanding Invoice?
Outstanding Invoice: A Basic Introduction
An invoice is a notice issued to a customer by a vendor or company that explains details of the products or services acquired by the customer. In an invoice, payment terms and policies, methods of payment, and payment due date are clarified.
When a company or vendor sends a customer an invoice, but the customer has not paid the invoice as of the due dates, the invoice is then counted as an outstanding invoice.
Here we will explain what is an outstanding invoice and how to deal with Outstanding Invoices.
Dealing with Outstanding Invoices
Outstanding invoices usually start by inconveniencing and interrupting cash flow and can shortly grow into affecting operations of the business. Interrupting cash flow may mean that the business owner is unable to pay their suppliers and employees.
With that, the business operation will be halted after some time. Late payments can also affect business reputation.
It is required of the business owner to have back up plans for tackling unpaid invoices as they are a major problem to the business operations.
Include Late Payment Dues In Your Invoices
Charging an extra amount on late payments is one sure way to receiving payments on time. You should include a late payment fee in your payment terms and policies at the initial stage of sales.
Reach an agreement with your clients in the form of a signature before you start supplying the goods. In other words, they should be cleared on the payment terms.
The late payment fee on your invoice should be in bold prints so it can be spotted. You can as well quote a percentage and do the math for clarity’s sake.
Total fee by October 12: $400
Total fee after October 12: $420
Before for the due payment dates, you could call them to remind them of the extra charge, or when they enter late fee territory, you could offer a deduction from the extra charge if they pay immediately.
Send Them An Email Or Letter
Usually, the first thing to do when the customer fails to make payment is reaching out to the customer. It can be done through email or letter. Your letter or email should be polite while you include the invoice number and payment due date. Also, ask them when they’re going to make the payment. Do not explain the details of the invoice since the invoice carries all the details; keep the content short and precise.
Send An Overdue Invoice
Another strategy to deal with unpaid invoices is by sending an overdue invoice. If you’re printing the invoice, add an overdue stamp on it. If you send it through email, the original invoice should be sent with the payment request. You may choose to include an overdue watermark.
Send A Statement Of Accounts
When an individual customer has more than one outstanding invoice with you, you must send them a statement of account showing all their outstanding invoices in it. Summarize them for a customer who has more outstanding payments.
You can also generate a statement with your accounting software. After sending a customer the statement of accounts, call them immediately to arrange a payment plan.
As a business owner, calling your customers from time to time will help you get paid quickly. It is a usual practice in some companies always to call customers who have unpaid invoices. If a customer does not pick up the call, it is obvious they are ignoring you, but it will be hard to ignore a call.
When you are on the phone with a customer, be precise and politely inform them of their payment. You can also ask when to expect your payment. You should conclude how to get paid before ending the call.
Stop Supply Until You Get paid
When you keep supplying customers with outstanding invoices, and you don’t get paid, your business will become unsustainable at some point. Do not fulfill their orders until they pay their outstanding invoices, be professional in your approach, and make them understand what they have to do to keep getting your supplies if you’re the go-to vendor. It could be tasking but effective.
Use A Debt Collector To Get Your Outstanding Payment
You can get a debt collector to obtain your payments from owing customers. Debt collectors can be professional in their approach when they go after outstanding invoices. In the process of hiring a debt collector, you may have to end any relationship you have with the customer. Consider the risk, but it takes about 25% of the total due to get their service.
Hire A Lawyer
Involving a lawyer is the next best thing to do if a debt collector firm couldn’t get it. You’re taking a legal action that depends on what organization you’re doing business with. If you hire a specialist lawyer, the case may become a complex one; they’ll have to deal directly with individual departments of both companies. If after you hire a debt collector where there are legal experts to help you get the right lawyer for the case.
Is Outstanding Invoice equivalent to Overdue Invoice?
Outstanding invoices are the invoices the company is yet to pay. After receiving an invoice, accounts payable sorts them and schedules a payment date after confirming the details, approval by management, and recording the invoice.
Overdue invoice, on the other hand, is an invoice that has not been paid after the payment due date is passed. In other words, an invoice is considered overdue when the customer fails to pay as of the due date. Invoices like these may have an extra charge that customers must pay. Overdue payments are also handled by the accounts payable of the company, and it c9mes at the top with the date when they became overdue.
An unpaid invoice can also be called an outstanding invoice; there’s no difference between both. Once a customer receives the invoice and fails to make payment by the due date, their invoice is considered unpaid or outstanding.
Outstanding payment is the amount of money yet to be paid out of the due amount. It is the balance that bears the interest of the products and services purchased on credit by the company. It can also mean a payment that may have been made but has not been approved as paid.
Meaning of Invoice Due Date
Invoice due date refers to the date stated on the invoice that the payment must be made at the latest. It can also mean the date on an invoice sent to the customer to make payment at the latest.