Outstanding invoices

Outstanding invoices are a common bottleneck in the accounts receivable management of organisations. They affect your cash flow, create administrative burdens, and can even lead to financial risks if they remain unpaid structurally. Fortunately, there is a lot you can do to maintain control over your invoicing process.

In this article, you’ll read everything about outstanding invoices: from what they are, to how to follow them up, prevent them, and automate the process with Payt.

Table of contents:

What is an outstanding invoice?

An outstanding invoice is an invoice that has not yet been (fully) paid by the customer, while the payment term has expired or is about to expire. These outstanding invoices can put pressure on your liquidity, especially if they involve multiple or large amounts.

It is important to register and monitor outstanding invoices properly and to take timely action to ensure they are paid. You can do this manually or, as more and more entrepreneurs do, via an automated credit management process.

How should you follow up on outstanding invoices?

Following up on outstanding invoices requires structure, clarity, and a consistent process. Below is a practical step-by-step plan.

Step-by-step plan:

1. Make contact
   The first step is personal contact. Call or email your customer to check whether the invoice has been received and if there are any questions. Sometimes there’s a simple explanation, such as a missed email.
2. Send a payment reminder
   No result from contact? Then send a friendly reminder clearly stating which outstanding invoice it concerns, including the payment term and payment details
3. Send a second reminder or final notice
   If payment still doesn’t follow, it’s time for a more formal tone. Send a final notice and state that additional charges will apply if payment is not made.
4. Claim statutory interest and charge collection costs
   According to the law, you may charge interest and collection fees for late payment. Clearly mention this in your communication.
5. Agree on a payment arrangement
   Is your customer temporarily unable to pay the full amount? Then offer an instalment plan. This way, you still receive your money and avoid unnecessary escalation.
6. Consider legal options
   Think about issuing a notice of default or involving a debt collection agency. Be sure to handle this carefully and in a legally correct manner.
7. Reclaim irrecoverable VAT
   If it’s clear that the invoice cannot be collected, you can reclaim the VAT from HMRC.
8. File for the customer’s bankruptcy
   As a last resort, you can file for bankruptcy. This puts pressure on the debtor to still pay, but it is a drastic step.

Want more information about this? Then read our article: ‘Customer not paying – what now?’.

How to prevent outstanding invoices?

You can prevent outstanding invoices by taking the following steps:

• Automate payment reminders: Automate reminders and final notices to inform customers on time.
• Clear payment terms: Set out clear agreements regarding payment deadlines in writing.
• Monitor creditworthiness: Check in advance whether customers are reliable to avoid payment issues.

How do you write a reminder for an outstanding invoice?

A good reminder for an outstanding invoice is short, friendly, and clear. Include:

• The invoice number and amount
• The original due date
• The new payment deadline
• The payment details (including a payment button such as iDEAL)
• A contact option for questions

Make it easy for your customer. The easier it is to pay, the greater the chance you’ll get paid.

Want to know more? Then read our article on payment reminders.

Automating payment procedures with Payt

Payt offers a complete solution for automating credit management. With the software, you can easily set up payment reminders and final notices, saving you time on administration.

Payt also helps you keep track of outstanding invoices and act quickly when a payment is missed.

Curious what Payt can do for you? Download our brochure below.

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