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Handling An Overdue Invoice – How To Ask For Payment Professionally



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- You're a sales professional,

and your best client owes you a ton of money.

What do you do?

We're going to talk about how to handle overdue invoices

on this episode of The Dave Lorenzo Daily.

(upbeat music)

Overdue invoices, overdue payments are a big problem

for you as a sales professional.

Hi, I'm Dave Lorenzo and this is The Dave Lorenzo Daily.

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So let's talk about how you handle overdue invoices

as a sales professional.

This is one of the worst problems you can have,

because it forces you to think about money and collecting

instead of the issues or the problems

you're trying to solve for your client.

So here's how you handle overdue invoices.

The first thing, of course, is to get paid in advance

as often as possible,

and that is my number one rule in sales.

Structure your offering in a way

that it looks like you're giving a discount

for advance payment.

You work with people on a pay-in-advance basis,

and then you don't ever have to worry about money

for the term of your engagement agreement.

But if you somehow manage to fall behind

and people owe you money, here's what you do.

The first time you reach out to them,

you reach out in the same three ways

you would reach out in the marketing process.

You're going to send a direct mail letter,

and you're going to remind them

that their invoice is 15, 30, 45, or 60 days past due.

That's a regular letter,

you're going to send it in the mail.

Then you're going to follow that letter up

with a phone call.

The day you mail the letter, you call on the phone

and you speak to your contact or you leave a voice mail

and you say you're calling to follow up on the invoice

that's 15, 30, 45, 60 days past due.

You also send an email.

Right after you make the phone call,

you send an email and you remind them

that they're 15, 30, 45 days past due.

In the meantime, your company probably has a policy

about stopping the shipment of products

or stopping the delivery of services at some point.

Whether it's 15, 30, 45 days past due,

you might have to stop services at some point.

My preference is

that date be moved up as early as possible.

As soon as someone owes you money,

they should get a notice.

So whether they're one day past due or 15 days past due,

you start this process;

mail, telephone call, and an email.

Then when you get to 30 days, 45 days at the most,

you tell them that you have to stop delivering services

or you have to stop shipping product,

and then you simply stop delivering services

and stop shipping product.

I never want people to owe me money

because that is a bad business practice.

Lack of cash flow is the number one reason

people go out of business.

So if you're a sales professional

and you work for someone else,

you may not think this is a big problem

but for the business, for the health of the business

it's a big problem.

If you're an entrepreneur,

you know what a big problem this is.

At 30 days you stop delivering services

and you let them know that you have to

stop delivering services at 30 days.

The way to say that professionally is

the first letter goes out the day they fall behind,

the second letter goes out at 15 days,

the third letter goes out at 30 days.

The first letter is very nice, I just want to remind you

that you forgot to pay your bill.

The second letter then steps up to

hey, listen, I know that we have a policy

that you have to be paid before we deliver services,

if I don't receive the payment in the next 48 hours

we're going to have to suspend our service.

And then on day 29 you let them know

that next day, 24 hours from now,

you're going to suspend the services.

Of course in the letters you're going to have to

write the letters about a week in advance.

So the day they fall behind they get the first letter;

the second letter goes out on the 14th day

and they'll get it by the 17th or 18th day;

and then by day 22, 23, you're sending out

the third letter to let them know

that on day 30 you're cutting of the services.

In the phone calls, don't be nasty,

don't take it personally.

When you make the phone call to your client

you simply say Mr. Client, I have to let you know

that we've gone 29 days now

and the payment is 29 days behind,

we're going to stop services as of this time tomorrow

if we don't receive payment.

If you'd like wire transfer instructions let me know,

I'm happy to send them to you.

That's it, very matter-of-factly.

Here's the main thing to remember.

If you're dealing with a big company,

only stopping service or stopping delivery

will get them to think outside the box of

what their policy is.

The reason I want this addressed up front,

or maximum at 30 days, is so that you get paid

and your cash flow isn't affected.

When you make them think about this issue

early in your relationship,

you never have a problem with it.

If you stretch this out to 45 days or 90 days,

and you're three years into your relationship

and you want to shorten it to 30 days or payment up front,

they're never going to agree to do it.

So you have to address this early in the relationship.

Finally, there is someone in every company

who can make sure you get paid.

Whether it's the CFO, or the controller,

or the CEO, or the business owner himself,

there's somebody in the company

that can sign a check right now,

regardless of what the company is,

and you just have to find that person,

you have to get the issue escalated to that person.

That's why I want you to draw a line in the sand,

30-day maximum, tell them there's no way we can do anything,

we can't ship anything unless you pay us within 30 days.

I'm Dave Lorenzo, and this is The Dave Lorenzo Daily.

We're here each day with a brand new sales tip.

Today we talked about overdue invoices.

Tomorrow we'll be right back here with a new way

to help you get more business in the front door.

Until tomorrow, I'm Dave Lorenzo

and here's hoping you do this and sell more.

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