One of the biggest sources of anxiety in any business owner or freelancer’s life is found when waiting for payments on invoices. While most people send invoices with a due date of 30 days, it is not uncommon to have to wait far longer to receive the funds that are rightfully yours.
Below, we’re going to delve into this subject, exploring your options for obtaining payment as well as seeking to answer that all-important question: how long is too long when it comes to waiting for an invoice to be paid?
Factoring in factoring companies
If you have struggled with delayed payments, then first and foremost, it’s worth exploring the possibility of factoring companies. These companies are predominantly quite niche; truckers can opt to use a a leading freight factoring company to deliver rapid payments on invoices, and similar services exist for business niches. These companies exist to help remove the long delays that can be so painful for businesses and freelancers to sustain, and they help to keep businesses running smoothly. They a’re a great option for guaranteeing regular payments without the worry over invoices.
As beneficial as they are, factoring companies are usually only available for business-to-business invoices. If you are a freelancer or dealing with members of the public, you’ll need another option to ensure you receive your funds on time.
Past the 30 day limit
When you send an invoice, it is vital to include a date by which you expect the invoice to be paid. However, if you tick onto the 31st day since the invoice was sent, many business owners and freelancers pause for thought.
At this point, you’d be within your rights to contact the customer that the invoice was sent to and request an update – but let’s be realistic: few of us feel comfortable doing that. They’re only a day over, and the last thing you want to do is ruin your relationship with the individual and cause them not to want to hire your services or buy your products in future.
As a result, most business owners sigh, acknowledge the invoice is overdue, but do nothing – and by and large, this is the right response. As a general rule, adding seven days could be considered reasonable.
By day 38, however, a second invoice should be sent, which is clearly marked “overdue”. Hopefully, this will spur your customer into action, but what should you do if it doesn’t?
The tipping point
You can continue to send light reminders as and when you see fit after day 38, but there is a point where you will have to acknowledge a sad reality: the invoice isn’t likely to be paid. Where you place this line depends on your personal beliefs, but most freelancers and business owners see 60 days as the cut-off point for polite recovery. At the 60 day mark, it may be worth investigating more aggressive debt collection options – you have waited long enough, and been more than reasonable, so an escalation at this point is understandable.
When working B2B, make use of specialist factoring companies that can dramatically reduce the time that you spend waiting for invoices to be paid. For B2C invoices, it is usually best to be flexible for a period, but to see 60 days as the point at which advanced debt recovery steps should be pursued.