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How to Collect Money from Overdue Invoices

How to Collect Money from Overdue Invoices?

Collecting overdue invoices is one of the most tedious yet crucial tasks in running a business. Collections are important if you want to keep your business functioning well. If you’re routinely having trouble getting paid on time, follow the right processes and establish effective systems.

Cash is the oxygen of business

A business needs a steady inflow of cash to keep running smoothly. Regardless of the size of the business, unpaid invoices can come to threaten its very existence. If cash flow is interrupted, you can’t pay employees, vendors, and suppliers.

Here are some tips to collect money from overdue invoices and keep your cash flow running smoothly. 

Be prompt in raising invoices

Raising an invoice is a clearly defined yet delicate operation. The management has to be clear on whether they have followed the proper procedures and channels. This is especially true for GST invoice, where the payment terms and address need to be correct and there should be no errors in the invoice whatsoever. Any mistakes here can cost the business dear, especially when it comes to claiming input tax 


If you want to be paid on time, it’s important you raise invoices on time. Send an invoice and related documents as soon as the work is completed. If you’re working with large clients, you’ll particularly need to make sure the paperwork is in place and you’ve followed the payment clause in the contract.

Negotiate for less credit period

Whenever your business enters into a fresh contract with a new party, make sure that the payment terms are beneficial to it. Negotiate for a credit period as short as possible. You may offer favorable payment terms to customers such as extending the credit period as a reward after a certain number of prompt payments.

Software for invoice tracking

You will find a lot of useful software specifically designed for the invoicing needs of businesses. One of these is EZO, which aims to automate accounting and banking for modern Indian businesses, especially start-ups and MSMEs. Ezo is a free tool that allows the manager to allot his time to revenue-generating activities, rather than deal with mundane tasks such as invoicing.

Its GST invoice function, in particular, is extremely useful for businesses. More and more business are registering themselves under the GST regime, which makes compliance with GST mandatory. Once all the desired GST invoices have been created, Ezo spontaneously creates the required reports for filing GST returns. One of the standout features of this accounting app is the incorporation of the latest technologies which enables Ezo to detect GST related filing errors.

Prompt follow up using app

When you don’t receive payment days after sending an invoice, conduct routine follow-ups with the client. You can call or email them or use an accounting software for automated reminders. If the payment date is missed again, follow up once again. Remember to be polite and professional in all your correspondence.

Non-payment Notice

If your polite follow-up communication isn’t working, you can escalate your efforts and remind the client of the due amount and how it violates the contract. If you charge a late fee, mention how they’re accumulating. Refrain from an impolite or threatening tone – this can reduce the likelihood of getting paid at all.

Legal notice if necessary

If after all your efforts, the client doesn’t budge, you may have to take legal action. Engage a lawyer to send a legal notice threatening action if the debt isn’t paid. Most clients will see the seriousness of the issue when they receive a legal notice and will finally pay up. Do consult your lawyer to understand if you should be wasting time on collection at all and what the chances of getting paid are.

Cash-rich business is the best business

To avoid having to deal with collecting overdue amounts, do some research on your customers’ history, including whether any lawsuits are pending against them. Always have a legitimate contract in place with them and maintain all records of transactions diligently. 

Most importantly, automate invoices and establish strong client relationships. Register at LegalDocs and sign up for Ezo. Track invoices and get timely reminders for payments with this free tool.

Need a hand with GST invoice and input tax credit? Come to LegalDocs for a quick, seamless process!

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