How fast should you start your dunning process? 

Have you ever found yourself short on funds and had to scramble to recall who paid their bills? 

After all, logging into your online banking only confirms what data is already stored in the accounting system - it doesn't inform you until after the fact. Most of us would like a better way to make sure that clients are paying invoices on time without having manually check our bank accounts every day. Thank goodness for modern technology which now allows us not just trust but also validate information quickly with convenience!

This two-minute exercise will save you from a world of trouble! Too often I find myself leaving my company's accounts untouched for at least three weeks, if not longer. If this sounds like you too then know that the impact can be damaging - by neglecting to review who has and hasn't paid daily, chances are overdue payments won't even occur to us until it's far too late. Don’t let yourself fall into the same trap – check your accounts regularly so that any uncollected funds don’t slip through the cracks!

With automation tools like reminder emails, you can easily keep track of payment schedules without having to spend days manually checking. With this approach, you can quickly set up an automated process and be alerted about overdue payments or past-due invoices in a timely manner.

This way not only will you save time but also reduce the risk of getting stiffed. By sending out a reminder as soon as you spot an overdue payment, you can encourage customers to pay up promptly and protect yourself from any financial loss.

So how fast do you need to send a reminder? Well, that depends on the situation. However, you should make sure that your reminders are sent out in a timely

Why is it important not to hesitate with the dunning process? 

There is a strong connection between how old a claim is and the chances that it will be paid. For example, if an invoice is only 30 days late, the chances of being paid have already dropped from 99% to below 70%. And after 90 days, the probability of getting paid decreases to below 15%. In other words, for every day an invoice is overdue, the chances of getting paid to go down by almost 1%.

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Thus, it is clear that following up quickly is key to getting paid on time. This means setting a reminder system in place to alert you when payments are overdue or invoices need attention. Automation makes this process much easier and saves you from spending hours manually tracking down payments.

All in all, if you want to ensure that your invoices are paid on time, it’s essential that you send out reminders as soon as possible. This way, you can encourage customers to pay up promptly and protect yourself from any financial loss.

Time matters! 

By merely checking payments and issuing payment reminders once per week, you are likely to only deliver those notifications an average of 3.5 days after the invoice is due which can significantly reduce your probability of receiving full payment.

Monitoring and sending payment reminders on a monthly basis will only delay income generation - usually resulting in fifteen days of waiting. Furthermore, it is estimated that when an invoice passes the thirty-day mark, the probability of receiving said payment drops to 90%. For invoices between 30-59 days late, there's still hope with 70% percent chance; however once you exceed 60-89 past due date this decreases significantly to 60%, while anything over ninety day period lowers your chances below 20%.

How fast can you send a reminder, and how early can you follow up?

I think it is best to remind the customer that payment is due the day BEFORE the invoice is due. Most customers want to pay on time, but they are busy. So, it is not a bother to remind them that the bill is due tomorrow. It might even help them remember to pay on time.

If the bill is not settled within one or two days after its due date, I will send a gracious reminder to the customer. This kind gesture illustrates that you are attentive and take your payment contract seriously. The reminders should be gentle yet light-hearted, depending on how familiar you are with your client. Adding some humor may also be advantageous in this situation!

Before the due date, incorporate a copy of the invoice with your initial reminder so it's effortless for customers to identify what they must pay and how. With 98% of SMS messages being read within three minutes, contemplate supplementing your second notification with a text message that has an attached link directing them to their payment page - this will be optimally beneficial!

After 5 days of your second payment reminder, it's best to contact the customer directly. If you're part of a larger company with daily interaction from another person such as a salesperson, that could be beneficial in this instance. It is recommended to send out the first reminder no later than 10 days after invoice due date and continue on accordingly unless there has been an agreement otherwise made between yourself and the customer beforehand.

Although these cash payments and prompt follow-ups may appear intimidating, remember that the chances of getting paid diminish by nearly 1% every day. Consequently, if you haven't won the lottery yet, be proactive and create a reliable procedure for following up with customers. From your customer's point of view, they will appreciate it more to receive a polite reminder about an overdue invoice than not hearing anything from you at all for 30 days--then obtaining one notification out of the blue!

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Ultimately, an efficient and straightforward payment reminder system is the key to improving your cash flow. Not only will it help you stay on top of invoices but it'll also show customers that you're serious about collecting payments on time. Developing this system can feel overwhelming at first, but with a bit of effort, you’ll get the hang of it in no time!

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