How to recover outstanding payments from your customers
Updated
Agree the credit period before you sell, put the due date and a way to pay on every invoice, remind before and after the due date, call when an invoice is 15 days late, and stop further credit at 45 days. A weekly look at your ageing report keeps this routine going.
Why money gets stuck
Most overdue money is not a refusal to pay. It is an invoice that reached the wrong person, a credit period nobody wrote down, a small dispute left open, or simply no one asking. A routine fixes all four.
1. Agree the terms before the first sale
Write down, for each customer, a credit period (for example 30 days from the invoice date) and a credit limit (the most they may owe you at one time). Tell the customer both. A customer who knows your terms pays closer to them.
2. Make every invoice easy to pay
An invoice should answer three questions without a phone call: how much, by when, and how. Put the due date on it, your bank details, a UPI QR code and, if you accept online payment, a payment link. Send it the same day to the person who approves payments, not only to the buyer who placed the order.
3. Remind before the due date, not only after
A short reminder three days before the due date is the most useful message you can send. It reaches the customer while the payment can still be planned. Follow it with one on the due date and one a week later. Keep the words polite and the same for everyone.
4. Look at the ageing report every week
Pick a fixed day. Open the ageing report and start from the oldest column. It tells you who owes what and for how long, so you spend your time on the few customers who hold most of the overdue money.
5. Call at 15 days
A reminder can be ignored. A call from the owner or the accounts person rarely is. At 15 days past due, call, ask for a payment date and note it. If the customer raises a problem with the goods or the bill, deal with it that week, with a credit note if one is due.
6. Hold further credit at 45 days
When an invoice is 45 days late, or the credit limit is crossed, supply only against payment until the account is cleared. Say this at the start, apply it to everyone, and it will seldom need to be used.
7. Record every receipt against its invoice
A payment kept “on account” leaves paid invoices looking overdue and your reminders going to customers who have paid. Set each receipt against the invoices it pays, note any TDS the customer deducted, and send a statement when a customer asks what is outstanding.
A routine for the week
- Every day: send invoices on the day of sale, and record receipts as they arrive.
- Every week: read the ageing report and make the calls.
- Every month: send statements to customers with more than a few open invoices, and review credit limits with your accountant.
Where EaseDesk helps
EaseDesk keeps a credit limit and credit period for each customer, puts the due date, a UPI QR code and a payment link on every invoice, and sends reminders before and after the due date in your own words. The outstanding report shows every customer’s dues with ageing, and a receipt can be set against several invoices at once, with TDS. See billing and collections, or start a free trial and send your first reminder today.
Questions
How do I ask a customer for payment without spoiling the relationship?
Make it routine, not personal. A polite reminder that goes to every customer a few days before the due date, with the invoice and a payment link, is seen as good practice. Problems come when nothing is said for two months and the first contact is an angry call.
When should I stop supplying a customer who has not paid?
Decide the rule in advance and tell the customer when you agree the credit terms. Many businesses stop further credit when any invoice is 45 days past its due date or when the credit limit is crossed, and supply only against payment until the account is regular.
Should I charge interest on late payments?
Only if it is written in your terms on the invoice and agreed with the customer. In practice, a clear due date, steady reminders and a firm credit limit recover more money than an interest clause that is never enforced.
What do I do when a customer disputes an invoice?
Settle the dispute quickly and in writing. If the customer is right, issue a credit note for the difference so the invoice shows the true amount due. An invoice that stays in dispute is an invoice nobody pays.
How does software help with collections?
It keeps the due date on every invoice, sends the reminders for you, puts a UPI QR code and payment link on the bill, and shows an ageing report so you know whom to call first.