Originally published in December 2021. Last updated on November 18, 2024.
Outstanding invoices are standard for every service business. But they become a problem when they go past due, causing cash flow issues that can prevent you from paying your bills and purchasing supplies.
The best way to handle them is to prevent them from happening in the first place with a solid invoicing strategy and payment process.
Use these tips to get paid faster, improve cash flow, and reduce your accounts receivable so you can focus on growing your business instead of chasing down payments.
Get paid on time with these 10 tips:
What is an outstanding invoice?
An outstanding invoice refers to a bill that hasn’t been paid yet.
It doesn’t mean a payment is late, it just means that you’ve completed a job, sent an invoice to a client, and are waiting to be paid.
If it isn’t paid by the due date, it becomes a past-due invoice.
Outstanding invoices and overdue invoices both make up your accounts receivable, but if an invoice passes the due date without payment, it should be flagged as late so you can move it through your collection process.
1. Offer multiple payment options
Clients are more likely to pay you in full and on time if you accept multiple payment methods.
Some customers will prefer to pay you in cash or using a check, while others will want to make payments online using a credit card or bank transfer.
READ MORE: Online and offline payment methods
The more options you offer, the more convenient it is for different clients to pay you. And the easier it is for them to pay their invoice, the more likely you’ll receive a timely payment.
Accept a range of payment methods to cater to as many clients as possible and stay up to date with new ways to pay as they emerge.
Pro Tip: Use Jobber’s credit card processing software to start accepting online payments today.
2. Ask for deposits
Deposits ensure a client is invested in a job before it starts. You can use the partial payment to purchase supplies, cover operating expenses, and improve cash flow.
The best times to ask for a deposit are:
- For large projects
- On jobs with big upfront costs
- When you’re working with a new client
- If a client has a history of making late payments
When a client puts money down, you know they’re committed to having the job done. If they’re willing to pay a deposit, chances are, they’ll pay the remaining balance when you send your final invoice.
3. Offer customer financing
Some clients need work done but don’t have the budget to pay the full balance all at once.
For example, after an emergency plumbing repair or when they have to replace an irreparable but necessary appliance, like a broken furnace.
When this happens, they may not make a late payment because they don’t want to pay you— they may not have the funds.
To prevent this issue altogether, consider offering customer financing. That way, if you go through a lender, you get paid upfront, while the customer is allowed to make smaller payments over time.
4. Set up recurring payments for repeat customers
If you regularly provide ongoing services to customers, like weekly lawn mowing or biweekly cleaning, set up recurring payment processing to get paid automatically after each visit.
That way, clients don’t have to remember to pay you, and you don’t have to remember to collect payment.
While you can accept recurring payments via check, the easiest method is to store your customer’s debit or credit card information using payment processing software like Jobber.
When you set up recurring payments in Jobber, clients are automatically charged each time a job is completed, ensuring you never have to deal with outstanding invoices or late payments.
5. Include payment terms in your invoices
Payment terms clarify when payments are due, how clients can pay you, and whether you charge late fees.
Including clear payment terms on your invoices helps clients understand your expectations regarding payment, preventing confusion and miscommunication.
Pro Tip: Communicate about your payment terms before a job starts so that you and your customer are on the same page before work begins. That way, they’ll know exactly when and how to pay in advance.
6. Use detailed invoices
Including payment terms on your invoices isn’t the only way invoices help you clear up outstanding payments.
Using detailed, itemized invoices that clearly outline the payment deadline, the total invoice amount due, services provided, and any deposits, discounts, or fees helps clients see exactly what they’re paying for.
This prevents questions and clarifications about bills from turning outstanding invoices into late payments.
7. Incentivize early payments
One way to prevent your accounts receivable from filling up with outstanding invoices is to offer early payment discounts.
They don’t have to be much, as little as 5–10% off can be enough to encourage a client to make a payment before the due date.
Just make sure you set parameters for when the discount applies. For example, you could offer a client 10% off if they pay within the first three days of receiving the invoice or 5% off if they make a payment any time before the due date.
8. Automate your invoicing
Late payments aren’t always a client’s fault. If you don’t send bills on time, they may not even know they have an outstanding invoice.
Invoicing software like Jobber automatically tracks the status of your invoices and gives you reminders to send invoices for finished jobs. With one click, you can send an invoice straight to your client.
9. Use quotes before every job
Quotes tell a client what to expect in terms of cost before a job begins.
When you use itemized quotes to break down how much a client will have to pay for labor, materials, and other expenses, like taxes, it tells them what to expect on their final invoice.
This gives them a chance to ask questions about the budget upfront before they approve the work. That way, they know how much to set aside or can ask questions about how to reduce the total, like by using more affordable materials or changing the project scope.
Then, they aren’t shocked when they get your invoice, since they knew what the total would be.
When clients have a good idea of the job’s cost beforehand, they can consider how to pay for it by the due date.
Use quoting software like Jobber to create and send detailed quotes to prospective clients, showing them exactly what they’re paying for.
READ MORE: Quote vs. invoice: Which one should I use?
10. Send outstanding payment reminders
If an outstanding invoice becomes an overdue invoice, send the client a payment reminder to let them know they’re past due.
While you can send one before a payment’s due, like 1-3 days prior to the invoice due date, it’s most common to send payment reminders when a delayed payment is:
- One day late
- One week late
- Two weeks late
- One month late
- Six weeks late
An overdue invoice letter can be helpful for clients who simply forgot to pay you, or who missed the original invoice in an overflowing inbox.
Pro Tip: If you’ve tried contacting the customer via email and text with no response, try giving them a call. It’s possible your message was lost or accidentally deleted.
READ MORE: 6 overdue payment reminder email templates
Overcoming outstanding invoices
Outstanding invoices aren’t a problem—until they are. The best way to keep them from getting out of hand is to prevent them from happening in the first place.
But as a service business owner, you probably don’t have time to create, send, track, and follow up on invoices, let alone chase down overdue payments.
Use invoicing software like Jobber to handle the invoicing process from start to finish, so you can focus on getting leads, booking more jobs, and growing your business.