How to Manage, Prevent, and Resolve Short Paid Invoices

Corey Deeth

Beginner May 24, 2024 8 min read

Skip ahead to learn about:

What is a short paid invoice?
How short paid invoices affect service businesses
Professional ways to handle short paid invoices
Short paid invoice letter sample
How to prevent short pays in the future

What is a short paid invoice?

A short paid invoice, or short payment, happens when a client only pays part of the total amount owing by an invoice’s due date.

For example, if you billed a client for $500 with a due date of May 31st, and they only paid $250, you would be left with a short payment.

How short paid invoices affect service businesses

Short paid invoices aren’t just a headache to deal with, they can also hurt your business. Here’s how:

They reduce profit. Without profit, you don’t have room to grow or account for increased costs.
They take up valuable time. Dealing with short payments takes time away from tasks that make you money, like paying jobs.
They hurt your cash flow. If you run on a monthly budget, partial payments leave you short, and you’ll have to take money from elsewhere to cover your costs.
They’re stressful. Not just from a financial perspective, but dealing with customer disputes takes a mental and emotional toll on you and any employees or contractors who are involved.
They cause accounting problems. Whether you use accounting software yourself or you have an accountant who manages payments, short paid invoices are hard to reconcile and add extra work because they need to be handled manually.
They impact customer relationships. Whether a short paid invoice is your fault or the customer’s, chances are, it could negatively affect your relationship going forward.

Professional ways to handle short paid invoices

The more efficiently and effectively you manage a short paid invoice, the less chance it has to negatively impact your service business. But it’s important to maintain your professionalism and handle them with tact to prevent making the situation even worse.

Here are the steps you can take to make sure you approach short pays with care:

1. Review the reason for the short-pay

Before you do anything, take a look at the short-pay in question. Consider the amount and any conversations or communications you or your employees had with the client that could explain the partial payment.

For example, did someone promise them a small discount because they were late for a job or brought the wrong materials? Or is the client a non-profit who receives a tax exemption? Was the short pay the result of an accounting error?

Don’t approach the client requesting additional payment until you’re certain the error isn’t on your end. If it was, correct it and make any necessary adjustments to future invoices. You may also want to send the client a note explaining the error and assuring them it won’t happen again.

Why short payments happen

Short payments happen for many different reasons, some more legitimate or understandable than others.

Valid reasons for short pays typically include:

Human error, like forgetting to deduct early payment discounts
Accounting errors, like a forgotten discount or refund
Automated payments that don’t account for additional services
Changes in pricing
Tax exemptions
Confusing or complicated payment processes

Invalid reasons for short pays encompass:

Client dissatisfaction or disputes
Lack of cash
Poor cash flow management
Haggling after a job is done

2. Determine a due date

If the short-pay isn’t your fault and you need to collect on it, the next step is to set a deadline. In most cases, you’ll decide to either:

Carry the balance to the next invoice
Request payment immediately

Carrying the balance forward is common for ongoing contracts where you expect to send another invoice to the client the following month.

Requesting immediate payment doesn’t mean payment is due this instant. Instead, it means choosing a reasonable deadline before informing the client. For example, within a week or ten business days.

Check back on the payment terms in your contract and invoices to confirm what you previously outlined to the client.

READ MORE: What to include on an invoice

3. Send a reminder

If you’re requesting payment immediately instead of carrying the balance forward to a future invoice, you’ll need to let your customer know. Either email, text, or call the client to let them know about the additional amount owing and provide them with information such as:

The due date
Accepted payment methods
The invoice payment terms they agreed to
An updated invoice that includes any late payment fees and the new amount owing

4. Be prepared for a discussion

If you aren’t sure why the late payment was made, be ready to navigate a potential dispute. Once you send a payment reminder for a short pay, an unhappy client will probably get in touch to explain why they think they shouldn’t have to make a payment.

Before you reach out, take down any details and review any and all communications with the client carefully. And talk to anyone on your team who was associated with the invoice and job in question. You want to make sure you get the full picture, first.

If it’s a valid dispute, let your client know the issue will be addressed and send them an updated invoice.

Evaluate each situation separately and do your best to work with the client. If they were short on cash, offer a payment plan option or if they missed a payment due to unforeseen circumstances, give them a short grace period.

5. Acknowledge the final payment was made

Once the client settles the short payment and the remaining balance is cleared, send a thank you note. Not only is this just good business practice, but it’ll also help to smooth over any residual awkwardness or embarrassment on the client’s part.

As with regular unpaid invoices, if the client still doesn’t make a payment by the adjusted due date after you send a reminder, you’ll need to move them to accounts receivable.

Short paid invoice letter samples

After you’ve reviewed the circumstances surrounding the short payment and determined it’s not due to an internal error by your team, it’s time to send a short paid invoice letter to your client. It should be polite, informative, and provide clear instructions for next steps.

Here’s a short payment email template you can use:

Hi [client name],

It’s [your name] from [your company].

Thank you for your payment of [$0.00] on [date] for invoice [#001].

We wanted to send you a quick reminder that the total amount due by [invoice due date] was [$ amount]. The remaining balance of [$ amount] is due [short pay due date] and can be made via [electronic payment, check, cash, etc.].

If you have any questions, please feel free to reach out to us at [email address], [phone number], or [office address].

Have a great day!
[company name]

And here’s a shorter version you can send via text:

Hi [client name],

As a reminder, the total amount due for [services provided] was [$ amount] by [original due date]. The remaining balance of [short pay amount] is due [short pay due date] and can be made via [accepted payment methods]. Please reach out with any questions!

Thanks!

It’s best to document any communication you have with the customer in case you need to reference it in the future, so try to remind customers about outstanding balances via email or text as opposed to phone calls.

How to prevent short pays in the future

Ultimately, the best way to manage short pays is to prevent them from happening in the first place. Here are some of the best ways to ensure your invoices are paid in full and on time.

1. Communicate clearly and often

Go over your payment terms with a client before a job starts and send professional invoices on a predictable and reliable schedule. Explain your expectations upfront, such as how and when you would like to be paid, and include pricing information in all of your quotes, estimates, bids, and proposals.

Pro Tip: Use a professional invoice template to easily create invoices that include payment terms.

2. Use invoicing software

The more automation you use when it comes to invoicing and payments, the easier your life will be. Try invoicing software that automates invoices and facilitates payment processes to make collecting online payments hassle-free and straightforward.

With Jobber, you can even send out automated and customized payment reminders to clients who have outstanding invoices.

Alt text: Automated follow-up text sent from a field service provider reminding a customer about an outstanding invoice

New to invoicing? Watch this video to find out how the experts write their invoices to get paid faster:

3. Try accounting software

If you’ve been managing your invoices and payments manually, chances are you’ve made a mistake here and there. The more you take care of your own accounting tasks on top of your other responsibilities, the more likely you’ll introduce errors.

Accounting software can help you to generate invoices, track payments, and even manage your accounts receivable. All of which can save you time, money, and a lot of headaches.

Not sure where to start? With Jobber Quickbooks Online integration, you get client management and accounting software all in one.

4. Accept credit card payments

The harder it is for a client to pay you, the less likely they are to do it. Sometimes, short pays are simply products of complicated and painstaking payment processes.

By implementing credit card payments using online payment software, you make it easy for your clients to settle their invoices, getting you paid four times faster than other methods.