As a business owner, you understand the importance of squaring away your invoices in a timely manner. In fact, according to a recent study, the average small business only has 27 days of cash reserves on hand. This means that when a client is tardy with their payment, you can run up against serious cash flow issues, making it difficult to cover the expenses that keep your business up and running.

Dealing with unpaid invoices can be tough. First, there’s the matter of diplomatically approaching your client who’s past-due, and then there’s the issue of making sure it doesn’t harm your business’s financial health. We’ll explore how best to handle all aspects of the unpaid invoice issue and set your business up for its most financially healthy year yet.

  1. Do Your Homework

One of the easiest ways to avoid unpaid invoices is to avoid working with clients who won’t pay you on time. While there’s no guarantee that a client who’s had a stellar track record of repayment in the past with other vendors won’t become delinquent in the future, it’s likely that those who have a history of poor repayment with others will continue that trend with you.

Before getting involved with a new client, consider running a business credit check. Companies like Dun & Bradstreet and Experian sell commercial credit reports, and this will give you visibility into their payment history. If their credit is weak because of lots of tardy payments, you might want to think twice before agreeing to work with them.

  1. Be Clear About the Terms

If you send out an invoice that doesn’t clearly outline when you expect payment, it’s understandable that some clients might take advantage of those vague terms and dawdle when sending you a check. When you send out an invoice, state your payment terms. Different industries will have different standard payment terms, so do your research to see what makes the most sense for your type of business.

You also need to take your own business’s needs into account. If you can’t wait 60 days for an invoice to be paid, don’t settle for that payment term just because that’s what other businesses in your field, who might be larger and have greater cash reserves, are doing. Always do what’s best for your business.

  1. Consider Mobile Invoicing

In this day and age, we all walk around with tiny computers in our pockets, so why not take advantage of this technology and switch from paper to mobile invoicing? Mobile invoicing reduces the lag time that comes with sending invoices through the mail, makes it less likely for your invoice to get lost in a sea of paperwork on your client’s desk, and makes it easy for you to track the status of all of your outstanding invoices right from your phone.

A service like Square Invoices makes tracking payments and sending reminders seamless, and it integrates with QuickBooks and other popular bookkeeping software. Plus, there’s no fee to your customers to pay you through the app.

  1. Don’t Get Angry

So you have a client that’s way past due on their invoice. What now? If your impulse is to send a nasty email, take a deep breath and remove your hands from your keyboard. Yes, you do have a right to be paid for the work you’ve done, but getting mad will not make the client any more likely to pay you, and angry communications might ruin your relationship with the client and cause them to look elsewhere for future projects.

Start by sending a professional email reminding them of the invoice and its due date. It’s possible that this was an honest oversight on their part, or that the invoice got lost in their spam folder or at the post office. If you don’t hear a response, or they respond but then still fail to send payment, a friendly (but stern) phone call is in order. Continue reaching out regularly at each stage of delinquency (30, 60, 90 days) until you receive payment or until you decide you need to involve some sort of outside help to collect the balance.

  1. Consider Invoice Financing

If your outstanding invoices are beginning to cause cash flow problems for your business, you might want to consider invoice financing. Lenders will advance you a percentage of the funds owed to you on outstanding invoices, and will use the invoices as collateral for the loan. Once you’ve received payment from your clients, you will pay the lender a fee and receive the remaining balance of the invoice amounts.

Approval for invoice financing typically has a quick turnaround of a day or so, which means it’s a good option if you’ve been holding out until the last minute hoping for those invoice payments to come through.

Unpaid invoices can be a big headache for business owners. They result in a lot of time wasted chasing clients for payment, and they can cause serious cash flow issues as the delay in payment drags on. It’s best to do some additional work up front to give yourself the best chance of being repaid in a timely manner. However, even if you do find yourself with a client in arrears, there are options available to you to work towards getting the money you’re owed while still keeping your business on track financially.