Timeline of an Unpaid Invoice
Fact: Invoices older than 60 days only have a 60% chance of being paid.
Fact: 50% - 80% of all new businesses close within their first ten years of operation.
Fact: 50% - 80% of all new businesses close within their first ten years of operation.
Running a business is tough enough without having delinquent accounts in your system. They drag down profits and add strain on the supplier/customer relationship. While it may be hard to see which accounts missed a payment and which have an inability to pay, there are a few indications that you should look out for.
30 to 60 Days Past Due
During this period, Invoices have a 60% chance of being paid.
The earliest signs can be seen within the first weeks after sending out an invoice. After not receiving payment you may have difficulty getting in contact with anyone at the company. Checks that were promised to be sent might be “lost” or “misplaced.”
These may seem like small problems but they show the business owner either doesn’t care whether you are paid or is hiding more serious problems. A clerical error looks better than financial troubles. Even when the owner has the best intentions of paying off the debt, they may not fully comprehend the severity of their situation.
The Signs:
These may seem like small problems but they show the business owner either doesn’t care whether you are paid or is hiding more serious problems. A clerical error looks better than financial troubles. Even when the owner has the best intentions of paying off the debt, they may not fully comprehend the severity of their situation.
The Signs:
- Customer dodging calls
- Constant excuses
- Requests for partial payment plans
60-120 Days Past Due
During this period, Invoices have a 40% chance of being paid.
At this point, it is without a doubt that this account has become a problem. The original invoice you sent has not been paid and depending their billing schedule, new invoices are also being ignored. Excuses from the company keep getting more elaborate.
“There must be something wrong with my post office. The checks I’m sending just keep getting lost.”
“I must have put down the wrong bank information.”
“I must have put down the wrong bank information.”
While these explanations might have drawn a red flag before, after three months of non payment, they are almost certainly lies to cover up an inability to pay. The owner is selectively paying bills, often pouring their own money into the business to keep it afloat.
The Signs:
The Signs:
- Excuses become more elaborate
- Difficulty keeping up with partial payment plans
- Checks coming back NSF
120 Days and Beyond
From here, invoices chances of being paid drop steadily until it is almost impossible to collect.
At this point an invoice has not been paid for one of two reasons. The owner has no intention of paying you for the services or goods you provided or has no ability to pay you. When trying to collect on these invoices the owner might cut the excuses and go directly to the point.
“I found your services to be insufficient so I won’t be paying your company.”
“Listen I just don’t have the money to pay you now. Give me time and I can pay you later.”
“The business is going under. I can’t pay you anything.”
“Listen I just don’t have the money to pay you now. Give me time and I can pay you later.”
“The business is going under. I can’t pay you anything.”
Yes it's true the owner might have a change of heart, or the business might turn around, but these are highly unlikely. Routinely betting on the unlikely is never a good strategy in business.
The Signs:
The Signs:
- Refusal to pay
- Claims of Bankruptcy
- Offers of partial payments to settle
How to Deal With a Late Invoice
Once you have identified a problem account what can you do? STAY ON THEIR CASE. If you resign to the fact that you won't receive payment then there is no chance you will be paid. If you have a “light touch,” only contacting the business once or twice a month, you won’t be taken seriously and you won’t receive payment.
You have to keep contacting the owner, asking for definite dates or time frames for when you will be paid. If you can’t keep up this sort of pressure, you may consider submitting them to MCB to collect the unpaid invoices. Morgan, Cohen & Bach has a proven track record of being highly effective at collecting past due balances.
In a study of invoices from Fundbox, over 64% of small businesses receive their payments late. Especially with new companies, one missed payment can be the difference between a profitable quarter or just scraping by. Use this guide to help your business shake off the weight of delinquent accounts.
You have to keep contacting the owner, asking for definite dates or time frames for when you will be paid. If you can’t keep up this sort of pressure, you may consider submitting them to MCB to collect the unpaid invoices. Morgan, Cohen & Bach has a proven track record of being highly effective at collecting past due balances.
In a study of invoices from Fundbox, over 64% of small businesses receive their payments late. Especially with new companies, one missed payment can be the difference between a profitable quarter or just scraping by. Use this guide to help your business shake off the weight of delinquent accounts.
