What should you do when faced with an unpaid invoice? Find out how to engage with your debtor, review credit documentation & decide when to hire a debt collector.

Unpaid Invoices – What To Do?

Most business owners and professionals have to deal with an unpaid invoice or slow paying customers from time to time. 

How successful you are at recovering your unpaid debt will depend on your internal credit management procedures, the terms and conditions outlined in your credit documentation, and the overall timeliness of your follow-up.

Here are some helpful hints to guide you through the process of engaging with your debtor and, when necessary, seeking outside assistance:


Review Your Terms of Trade

The conditions in your terms of trade are an effective way to communicate and document the expectations of all parties involved in the transaction. This documentation should be signed and agreed upon before you supply the goods or services.  

Your terms of trade should outline the expectation of when the invoice will be paid, as well as any additional fees that may -be incurred as a result of late payment. It should also provide you with protection if a debt remains unpaid and you have to commence recovery action and/or go to court. Amongst other things, clauses such as jurisdiction and governing law, retention of title over goods (registering your security interest on the PPSR), limiting your liability and obtaining personal guarantees are all important clauses to consider when reviewing your terms and conditions of trade. 

If your credit documentation does not contain adequate protection, it may be more difficult to recover your unpaid debt.  By having your credit documentation reviewed by a debt collection agency, you can be confident of increasing your chances of successful debt recovery. 

Most importantly, when you open a new account, always check the legal entity of your new customer. If you don’t check you may find yourself dealing with the wrong company, or worse – an insolvent entity. Many debt collection problems arise because suppliers fail to confirm who it is they are dealing with. 


Employ Follow-Up Strategies

As a rule, the longer you wait to start following up an unpaid invoice, the less likely you will be to recover it.

To avoid this, set up an automated reminder system to prompt your customer to either pay their debt or make contact with you to arrange a payment plan. Most businesses start sending reminders after the due date of the invoice, before following-up with further notices and phone calls in quick succession. Most small business accounting systems allow you to send reminders by both email and SMS, so take advantage of this feature – after all, you are already paying to use the technology, so you might as well set it up to support your cash flow. 

Keep in mind that sometimes customers have legitimate reasons for not paying their invoices. They may have simply forgotten about it, or there may have been a technical error and they never received the invoice in the first place, but until you make contact, your customer may choose to leave the debt unpaid. 

By keeping your initial reminder notices friendly and approachable, yet still to-the-point, you avoid the risk of compromising the relationship with your customers.


Approach a Debt Collection Agency

Have you exhausted all your internal measures to resolve an unpaid invoice? The range of services offered by a professional debt collection agency will increase your chances of success, while saving you time and money and allowing you to get on with growing your business.

With access to unique debt collection technology, proven negotiation strategies, and an obligation to follow guidelines published and enforced by the ACCC and ASIC, you can be confident your matters will be handled in a timely, ethical, legal and effective manner.

If needed, a licensed debt collection agency can also assist you to commence legal action against your debtor. A range of legal remedies are available depending upon the circumstances of your debt, and your collection agent will be able to explain the process, timeframes and cost to best address your unpaid debt. 


Do you have any questions about dealing with an unpaid invoice? Send your questions to AMPAC Debt Recovery by calling 1300 426 722 or send an enquiry for more information.