Keeping a truck on the road can be expensive. Throw in the fact that you may have clients who don’t pay their invoices on time, and you could soon find yourself dealing with a cash flow problem.
Unfortunately, overdue invoices may be out of your control to some extent. But with the right tools and resources, you can alleviate the disruption they may cause to your business.
Paying your employees and your own bills on time shouldn’t be a struggle just because you have clients waiting to pay theirs. Know how to avoid overdue invoices and help your business succeed.
The Difference Between Overdue and Outstanding
The key difference between an overdue invoice and an outstanding invoice is the last payment due date. Generally speaking, there will always be an agreement between you and your client that is designed to give your client a set time to pay their invoice.
This timeframe is typically 30, 60 or 90 days. An overdue invoice, commonly known as a past due invoice, is one that has gone unpaid beyond its last agreed-upon payment date. An outstanding invoice is unpaid, but the last agreed-upon payment date has not yet been passed.
How Do You Handle Past Due Invoices?
Overdue invoices can easily and quickly cause a cash flow problem for your business. This can cause delays in transportation for any new or current clients as well as impact your payroll.
Avoiding these cash flow disruptions may not always be possible. However, here are six tips that you can follow to alleviate this issue and prevent it from becoming a frequent problem.
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Read up on the best tips to help your business avoid overdrafting to ensure that you can stay in the black.
Set Up Clear Payment Terms
Before you find yourself having to deal with overdue invoices, you can attempt to avoid this issue by setting up clear payment terms from the start. This means having an agreed-upon contract in place where payment terms are absolutely clear without any confusion as to when the payment is due.
This can help you hold your client accountable while giving you the coverage you need. Without a specific payment due date, there will be no way to hold them accountable for paying on time, which is why clear payment terms are essential.
Turn On Invoice Notifications
With the help of innovative software, you can now turn to accounting tools and invoicing systems that can help you remind your clients when their invoices are due. You can set it up so that these systems will automatically send out invoice payment reminders to both yourself and your clients. These reminders can be based on due dates, past due dates and even those in collection status.
Follow Up and Reach Out Directly
If you don’t have accounting software or an invoicing system in place, following up or reaching out directly to your client is recommended. People are busy and may lose track of invoices, so reminders can be helpful for everyone involved.
You can start by sending them a friendly reminder that notifies them of the fact that their invoice is past due. From there, provide them with a list of their payment options. This is also where being able to accept multiple forms of payment can be beneficial for your business as well.
Discontinue Loads
If you are still working with clients who currently have overdue invoices, it’s recommended to immediately quit delivering loads for them as you are essentially working for free. Consider making a list of people you will not work with under any circumstances until their invoices are paid in full.
Keep the list updated with clients who have overdue invoices. This can help you prevent people from accruing balances, which will cause even more distress for your cash flow.
File For Collections and Legal Action
While not ideal and typically the last step a carrier will take when dealing with overdue invoices, you can file for collections and take legal action against a client with a past due invoice. This is not ideal as the debt collector will generally charge you a high percentage rate to collect the debt, which minimizes the amount of money you will actually be able to collect.
Although, if you have exhausted all of your options, getting some money back is better than nothing at all. Plus, this route helps you avoid having to continue to waste your own time and resources going after people with outstanding balances.
Work With Factoring Companies or Load Boards
Factoring agreements can help you avoid having to overdraft your business bank account. They can also help fuel growth for your business. There are companies out there that will actually work with you to buy your overdue invoices from you and then collect the amount owed directly from the original client.
These companies are called invoice factoring or freight factoring companies. They aim to alleviate the burden that overdue invoices can create. These companies will run credit checks on your clients to determine their credit history as well.
This will let them know how they are managing their credit lines and whether or not they are paying their invoices on time. Invoice factoring companies will also generally take over all of the accounting details and associated paperwork, which minimizes the hassle that you would otherwise have to handle.
As a carrier, working with reputable load boards can be beneficial. Many load boards will offer credit checks to ensure that you are hauling freight for brokers and companies that will pay you in a timely manner. Some of the best invoice factoring companies are readily available to help you keep your cash flow consistent.
What To Do If Overdue Invoices Eat Up Cash Flow
Have overdue invoices affected the cash flow of your business? Freight or invoice factoring may still be options that can help you remain in operation despite the lack of cash flow.
These companies can help you ensure a much faster turnaround time for your payments while reducing even more time with automated processes in place. They can help with your accounting services and help you establish credit.
Generally speaking, they will typically conduct credit checks on your customers for you as well to let you know where they stand with their payments. If overdue invoices remain a constant, consider becoming a company driver rather than an owner-operator.
This will take away your own personal overhead as well as your ability to ensure that you can get paid, not only as a requirement but also as much as you deserve. Don’t let yourself go down simply because your clients aren’t paying as they should.
There are resources out there for you to use. You just have to take the step and let them help.
Stay in Operation and Avoid Going Into the Red
Cash flow in the trucking industry can be exhausting to maintain, especially with the constant increase in gas prices. You may have more money going out than coming in at certain times.
In order to avoid going into the red, you might need to reach out to professionals who can assist you. Thankfully, as a carrier, you have options.
If you’re tired of handling overdue invoices, freight factoring as well as various other options exist. They can help you remain in operation while also maximizing your cash flow. Reach out to a freight factoring company today to ensure that you can pay your employees and your bills on time, even when your clients aren’t paying theirs.
FAQ
The first step is to determine which invoices are actually overdue versus which ones are simply outstanding. Ensuring that you have a contract with payment due dates in place is crucial.
An overdue invoice is an invoice that has been unpaid since the last agreed-upon payment due date.
According to federal law, an invoice can have an outstanding status for up to six years. As long as you have proof of service or delivery, clients shouldn’t be able to deny payment.
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