When Should You Follow Up on Unpaid Invoices?

All business owners know that following up on overdue invoices is a delicate balance.  Making a decision on when and how to follow up needs to be balanced against many rapidly changing variables. So, as a business owner, when should you follow up on unpaid invoices?

Here are some factors to take into consideration when deciding.

There are legal timelines for collecting debts

In Australia, there are debt collection guidelines in place to protect consumers, which are regulated by the ACCC. According to the ACCC guidelines once 6 years has passed, the debt is classed as expired and can no longer be collected on. The exact time period can vary from state to state, and it’s important to be aware of the laws governing your local area.

The longer you leave the debt, the less likely it is to be paid

According to a recent report, over half of all small businesses receive late payments for invoices. The average arrival of payment is 23 days after an invoice is due. Industry trends show that the longer a debt is left, the more likely that debt is to remain unpaid. Ensuring that invoices are correct and promptly followed up upon a non-payment is important when invoicing.

Is the value of the unpaid invoice worth the time taken to collect?

A survey conducted within Australia showed that 41% of all businesses spend between 2 – 5 hours per week chasing unpaid invoices. Time is valuable for business owners and often the amount of the invoice is worth far less than the time it takes to receive the payment. However, when multiple small invoices stack up, cashflow for the business is severely impacted. Instead, business owners should be focusing on operating their business, growing their business and other administrative duties such as issuing new invoices.

You could see a greater loss by not hiring a collection agency

A common hesitation towards engaging a debt collection agency, is often surrounding the fees aligned with that service. The more important thing to consider is although debt collection agencies may take a small fee or commission, your business loses more if the invoice remains unpaid. Moreover, the time spent for you as a business owner collecting that debt is far more likely to be greater than the fee an agency would charge for collection.

Following up on unpaid invoices is always going to be an issue that business owners face. Having a well set out strategy and preferred collection agency is something you can prepare now, to save you a lot of time and energy in the future. Remember: collecting some of an unpaid invoice is more money for your business than if an invoice wasn’t collected at all.

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