outstanding invoice

Chapter 22

Outstanding Invoice: A Basic Introduction

Author: Riddhi Patel

Jul 21, 2020

What Is An Outstanding Invoice?

An original invoice is a notice for an outstanding payment issued to a customer by a vendor or company that explains details of the products/items or services acquired by the customer. In an invoice, payment terms and policies, methods of payment, and payment due date are clarified.

What is an Outstanding Invoice?


When a company or vendor sends the consumer or buyer a bill for instance they send it for the products/items or services they have sold, but the client has not paid the bill as of the due dates, the statement is then counted as an outstanding invoice. Outstanding meaning as the invoice is being neglected and not paid yet.

What Is Past Due Invoice?

Most of the businesses must have lots of accounts that are extensively unpaid even the due date has passed. Such unpaid invoice sometimes makes businesses lose thousands of dollars and leave them with extra hours of work by chasing payment for the unpaid bill. In this case, past due invoices come to the rescue and help businesses get the payment. Basically, it works as a reminder invoice.

Outstanding Invoice vs. Past Due Invoice

Many business get confused about what is an outstanding balance and outstanding invoice. Well, all unpaid invoices are considered as outstanding invoices as per the accounting system terms and policy. An overdue bill is also a part of an outstanding invoice until it is paid. However, this situation occurs when a client or company fails to pay outstanding invoices by the due date. In the company’s upcoming payment cycle, you must mark such outstanding invoices as “due upon receipt” and then generate past due invoices.

Why It Is Risky To Have Outstanding Invoices?

The outstanding invoices can ruin your business credit in the market. Based on the outstanding invoices vendors can lower the company’s credit limit or stop accepting orders from that client’s account. In the worst scenario, past due invoices pending for a long time may eventually go to a collection agency. This results in a permanent bad credit mark against the company or business owner, depending on the business’s legal policies. Seeing such marks on the list, other vendors may not do further transactions with the company that has many invoices past due dates.

How To Handle Past Due Invoices?


How To Handle Past Due Invoices?

When business owners need to send payment reminders for past bills, most of them get hesitant and find it difficult to chase the customers for the money they owe and make a loss. Here are a few tips to handle past-due invoices and help you avoid getting late payments.

  • Dealing with Outstanding Invoices

Outstanding invoices usually start by inconveniencing and interrupting cash flow and can shortly grow into affecting operations of the small business. Interrupting cash flow may mean that the business owner is unable to pay their suppliers and employees.

With that, the business operation will be halted after some time. Late payments can also affect business reputation.

It is required of the business owner to have backup plans for tracking unpaid invoices as they are a major problem to the business operations.

  • Include Late Payment Dues In Your Invoices

Charging an extra amount on late payments is one sure way to receiving payments on time. You should include a late payment fee or penalties in your terms of payment and policies at the initial stage of sales.

Reach an agreement with your clients in the form of a signature before you start supplying the goods. In other words, they should be cleared on the payment terms.

The late payment fee or penalties on your bill should be in bold prints so they can be spotted. You can as well quote a percentage and do the math for clarity’s sake.

  1. Total fee by October 12: $400
  2. Total fee after October 12: $420

Before the due payment dates, you could call them to remind them of the extra charge, or when they enter late fees territory, you could offer a deduction from the extra charge if they pay immediately.

  • Send Them An Email Or Letter

Usually, the first thing to do when the customer fails to make payment is to reach out to the customer. It can be done through email or letter. Your letter or email should be polite while you include the bill number and payment due date. Also, ask them when they’re going to make the payment. Do not explain the details of the bill since the bill carries all the details; keep the content short and precise.

  • Send An Overdue Invoice

Another strategy to deal with an unpaid bill is by sending an overdue bill. If you’re printing the bill, add an overdue stamp on it. If you send it through email, the original invoices should be sent with the payment request. You may choose to include an overdue watermark.

  • Send A Statement Of Accounts

When an individual customer has more than one outstanding original invoice with you, you must send them a statement of account showing all their outstanding invoices in it. Summarize them for a customer who has more outstanding payments.

You can also generate a statement with your accounting software. After sending a customer the statement of accounts, call them immediately to arrange a payment plan.

  • Phone Them

As a business owner, calling your customers from time to time will help you get the payment quickly. It is a usual practice in some companies always to call customers who have unpaid invoices. If a customer does not pick up the call, it is obvious they are ignoring you, but it will be hard to ignore a phone call.

When you are on the phone with a customer, be precise and politely inform them of their payment. You can also ask when to expect your payment. You should conclude how to get payment before ending the phone call.

  • Stop Supply Until You Get paid

When you keep supplying customers with outstanding invoices, and you don’t get paid, your business will become unsustainable at some point. Do not fulfill their orders until they pay their outstanding invoices, be professional in your approach, and make them understand what they have to do to keep getting your supplies if you’re the go-to vendor. It could be tasking but effective.

  • Use A Debt Collector To Get Your Outstanding Payment

You can get debt collectors to obtain your outstanding payments from owing customers. Debt collectors can be professional in their approach when they go after outstanding invoices. In the process of hiring a debt collector, you may have to end any relationship you have with the customer. Consider the risk, but it takes about 25% of the total due to get their service.

  • Hire A Lawyer

Involving a lawyer is the next best thing to do if a debt collector firm couldn’t get it. You’re taking legal action that depends on what organization you’re doing business with. If you hire a specialist lawyer, the case may become a complex one; they’ll have to deal directly with individual departments of both companies. If after you hire a debt authority collector where there are legal experts to help you get the right lawyer for the case.

When Should You Send Overdue Invoice Templates?

Sending reminders for unpaid invoices completely depends on your small business policies and your financial cash flow. You may send such invoices as soon as the payment due date has passed, or you may simply remind about the payment to the client following the above-given steps and if they ignore your reminder then it is the right time to send a late payment bill. Generally, people send invoices after 30 days and then 60 days, so it completely depends on your preferences.

When Should You Send Overdue Invoice Templates?


After sending invoices you need to chase the clients for the payments. Some people chase by calling a client for the payment request, some write emails, basically, everyone has their own ways as per their expertise and skill to chase the invoices for getting paid quickly. But, sending past due invoices is known as one of the best options to chase a bill in a polite way.

3 Past Due Invoice Email Templates To Follow


3 Past Due Invoice Email Templates To Follow

The best practice for your customers to send payment as soon as they receive your bill. However, some customers don’t follow this best practice and businesses have to chase them for a long time. So, if you are waiting to get paid for the job you have completed weeks ago, and you are worried about getting a late payment, it must be tough for you to ask for the late payment. In this situation, it is ideal to use ready-made reminder templates.

There are three categories of email reminders ideas that you can follow for asking for late payments. You may need to continue sending follow-up emails until you receive your payment for the bill you sent.

Here are three ready-to-use past due to email templates with modular tone and polite languages that you can use and send them as a reminder:

Why sending this payment reminder will work: This payment reminder is short, friendly, and informative and it is the key to help your client remind about the payment date of the invoice before one week on their correspondence email address. There is no need to bother your client with lots of information in the first reminder. And also, you don’t need to request the payment straightway as the bill is not due yet. When your consumer will get this email, they will recognize that you are regularly tracking your invoices, so you will get back in touch with them if they do not pay their invoice on time.

Why sending this payment reminder will work: This email reminder is the most important email since this will be your first call to action that will remind your client to make their payment on the due date. This template is to the point but still polite and friendly – that the invoice is not overdue yet technically.

Why sending this payment reminder will work: This is the first email that will address your clients that the invoice is overdue. With this email template, you can start firming up your tone and also remind your client about the late payment and amount due. This will help your client get a clear reminder of the actual amount and the possibility of late payment charges in case they don’t pay now.

After all the attempts of sending email reminders, if you still don’t receive the money then as per your agreements you can report the invoice to the collection agency or take other legal support. But make sure you avoid mistakes while sending reminders for the bills, make things clear, and maintain accuracy throughout the process.

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