6 Friendly (yet effective) Methods to Handle Invoice and Payment Disputes + 10 Ethical and Enforceable Tactics to Make Sure your Invoices get Paid
Posted on 14th September 2021 at 09:57
6 Friendly (yet effective) Methods to Handle Invoice and Payment Disputes
Talking about money is never easy, especially when you’re a small business owner. But, unfortunately, there’s no avoiding it! There will come a time where you get a client or two who disputes an invoice, and you will have to manage it in a way that doesn’t damage your relationship.
If you want to prevent payment disputes (and know how to resolve them if they do come about), you have to implement effective credit control procedures. Here are 6 ways to manage invoicing and payment disputes easily and effectively.
Talking about money is never easy, especially when you’re a small business owner. But, unfortunately, there’s no avoiding it! If you want to prevent payment disputes (and know how to resolve them if they do come about), you have to implement effective credit control procedures.
1. Be Organised
You don’t want to waste more time than you need to resolve payment disputes, so make sure to keep good records and be organised. You want to be able to find your agreed deliverables and any information you need on billable costs as quickly as possible.
2. Always Agree on Cost First
Before you complete a job or send an invoice, you have to set expectations with your client. Talk to them about the service you will be providing and by when and how much it will cost.
Agreeing on the billable cost before you undertake the work is essential to minimising any payment disputes. If you can follow up the discussion with a quote and having them agree to the proposal, even better! You’ll be able to refer back to this if you have any issues in the future.
3. State your Invoicing Terms as Clear as Possible
To ensure that your clients pay efficiently (and to nurture a consistent cash flow for your business), create a payment policy and make it clear. Your clients need to know how to make the payment, what your payment terms are and when they have to pay it. They’ll also need to be aware of the consequences if they miss deadlines.
4. Be Friendly (but stick to your guns)
The worst thing you can do in a dispute is to immediately cave to what they want or to respond in a very emotional way. To avoid getting angry or frustrated with the client, make sure you have all of the documents and figures you need to justify your point. Then, you can come back to them with a clear and very reasonable explanation and they’ll be more willing to agree.
In the instance that it was your mistake, own up to it quickly and send a revised invoice. The aim is to not burn any bridges here!
5. Work towards a Resolution
Regardless, whether or not it was your fault or the client’s fault, or just a misunderstanding, it doesn’t really matter; at the end of the day, you both want to come to an agreement that satisfies you both. Keep this in mind when handling an unpaid invoice or payment dispute and always communicate via email so you have a record of what’s been said.
6. Seek the Support of an Accountant
If you’re really struggling with unpaid invoices and managing your accounts receivables, an accountant can help you build a consistent cash flow. From putting the necessary software in place to chasing payments for you, they can guarantee that you get paid what you are owed on time AND without damaging any client relationships.
10 Ethical and Enforceable Tactics to Make Sure your Invoices get Paid
Wouldn’t life be simple if you could guarantee that your invoice would get paid on time every time? Sadly, this isn’t always the reality. With the economy coming out of recession, there is a very clear and present danger that your business invoices may not get paid in a timely fashion. Here are our best tips for getting your invoices paid:
Wouldn’t life be simple if you could guarantee that your invoice would get paid on time, every time?
1. Invoice Promptly
The longer you take to invoice someone, the more likely the bill won’t get paid. Of course, no invoice normally means no payment… Do you remember the early days of running your business? When you were amazed that some business owners got lax with their billing? Then, you get busy servicing your customers and clients and the admin slips. Before you know it, you become that business owner who has become slow to invoice!
If you are finding that you are getting behind on your admin, then give us a call. We can take care of your bookkeeping and other financial processes to leave you free to run your business.
Cloud accounting software such as Xero, Quickbooks or Freeagent, all include the feature to do recurring invoices. So, where you have a regular repeating invoice for the same amount with a customer, use this recurring invoice feature to cut down the chance of missing an invoice.
2. No Billing Surprises
The more unexpected a bill, the more likely it won’t get paid. If a project is going to occur some extra expense or cost, always talk to the client or customer promptly about it. If you just crack on with it and don’t tell the customer about the unexpected cost coming their way, you risk getting into a payment dispute.
Before you bill someone, always make sure that:
They are aware and expecting the bill
They have agreed to pay the bill
3. Make it Easy to Pay your Invoice
This is such a simple one but easily missed. Make sure you are removing any barriers to pay your bill. Such as:
Including a ‘pay now’ button linked to a payment gateway on your invoices. For example, Xero will do this for you with your Stripe account. Some customers may be happy for you to type in their card details over the phone using this option.
If you visit the customer on-site, then have the means to take payment whilst you are on site. E.g. with a card machine. Technology is such that you can easily connect a gadget or download an app to your phone to take card payments. No need for an expensive and bulky card terminal.
Including your bank details on the invoice. (You will be surprised how many businesses and tradespeople don’t do this).
Offer your customers the option to do a bank transfer, set up a direct debit or pay by credit card. If possible, try to avoid offering the option to pay by cheque as getting to the bank can take time.
4. Set up a Direct Debit or Payment Mandate for your Customers and Clients
If you have regular customers, getting a direct debit mandate signed from them is a great way to be more in control of when they pay you. GoCardless is an inexpensive direct debit solution that integrates well with the likes of Xero, Freeagent and Quickbooks. Our team can help you set up Direct Debit for your customers.
5. Ask for Payment Before you Start Working for the Customer or Client
There is no rule saying you can only invoice after you start work for a client. In fact, we would ask for payment upfront for some of our services, such as a client wanting a one-off tax return. If you (or your customers) are not happy with a 100% upfront payment, why not ask for a deposit to get the work started?
6. Build a Relationship with the Accounts Payable Team at your Customer's Business
It always helps to be nice to the person at your customer’s business who actually pays your bill. The stronger the relationship you have with them, the more chance your invoice gets paid promptly and without being ‘delayed’. This may not be your direct contact. It could be someone in their finance or accounts payable team/department. So, who in the customer’s organisation is responsible for accounts payable? Can you get their name and contact details to help ‘ease the way for your invoices to be paid’?
7. Understand your Customers’ Accounts Payable Process
Do you need a PO (Purchase Order) number on your invoice? How does the invoice need to be addressed and who to? What needs to be on the invoice for it to be paid promptly? Who at your customer’s organisation needs to sign off the invoice before it will be paid? Who in the customer’s organisation is responsible for accounts payable? And can you get their name and contact details to help ‘ease the way for your invoice to be paid’?
When a finance department is preserving cash for a business, they will reject an invoice for payment for the smallest reason.
8. Put in Place a Process for Unpaid Invoices
For example, this could include a series of communications when the invoice is issued. Then a call or email the day before the invoice is due to see when it is going to be paid. Then a series of calls or emails a number of days and weeks after the invoice is due to be paid.
Most accounting systems such as Xero, Quickbooks, Sage etc will have a feature for automated reminders for invoices. If you need more than the basic invoice chasing that this software will provide, consider using a more sophisticated credit control tool such as Chaser.
9. Consider Offering a Payment Plan for Customers who have Built up a Large Unpaid Debt
Most customers want to pay your bill. But sometimes stuff gets in the way. So consider offering a payment plan. Getting paid over 6 months in instalments is better than not getting paid at all.
10. Stop Work if your Invoices don’t get Paid
We see this regularly. Where a business owner carries on working for a customer in the hope that the invoices will get paid eventually. The debts pile up and may never get paid. You’ll be surprised how quickly your unpaid invoices may get paid if you stop working for a client, particularly,
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