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Customer Self Service Portal
Customer Invoice Distribution
Cash Application
Gaviti Disputes and Deductions
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ERP Compatibility
Use cases

Overdue Invoice

Ideally, when you issue an invoice, it includes a deadline. For B2B customers, this commonly ranges from 14 days to 30 days. When or whether clients pay within this time determines the status of the invoice. This can range from outstanding to past due. It also determines whether you will need to write an overdue invoice letter to your customer.

What Is an Overdue Invoice?

An overdue invoice occurs when a customer fails to pay his or her bill within the agreed-upon time frame. When invoices go unpaid for too long, they disrupt operations and make it difficult for your business to meet its own financial obligations. This domino effect can continue to send ripples throughout the industry and are most damaging when big corporations owe the bill.

What Is the Difference Between an Outstanding Invoice and a Past Due Invoice?

From the time that you send the invoice to the deadline or payment, the invoice or payment is outstanding. It becomes late or past due the day when the deadline passes and you still have not received payment. Some companies might also set a specific number of days to differentiate the two. For example, one invoice might be considered overdue if it is 30 days past due.

What Is an Overdue Invoice Letter?

Also known as a dunning notice, the accounts receivable team creates a series of these and submit them via email or even text. They increase in urgency with each succeeding notice. Some letters state that if the customer doesn’t pay within a certain number of days, the account will be turned over to a collection agency. Some other businesses might threaten legal action or a refusal to extend further credit.

A good overdue invoice notice includes the following components:

  • Amount of the outstanding balance
  • The date the payment was due
  • Any late fees assessed
  • Available payment methods
  • Request to pay as soon as possible

What Can Companies Do to Reduce Overdue Accounts Receivable?

Even with the best risk management systems, if you extend trade credit, you will likely face late payments and defaults at some point. Companies often turn to these options to boost early and on-time payments:

  • Offering discounts for early payment: You can allow your customers to take a percentage off the total amount when they pay the invoice early, such as 1% for 10 days ahead.
  • Partial payments: You can accept partial payments with the understanding that the balance must be paid in full by a predetermined date.
  • Accounts receivable automation: Software can streamline and digitize many of your manual tasks related to accounts receivable, including issuing invoices and sending reminders.
  • Reducing the number of days until payment is due: Some companies have seen a boost in payments by reducing how much time customers have to pay the invoice.
  • Providing several options for payment methods: When you offer multiple payment options, it makes it easier for your customers to find what works well for their needs.
  • Sending reminders before the due date: Giving your customers a heads-up before invoicing and before the due dates can help remind them to pay early.
  • Adding late payment fees: Late fees make each transaction more expensive, so smart business owners will do everything possible to avoid them.

How Can Accounts Receivable Automation Help?

Accounts receivable automation can help companies reduce overdue accounts receivable by automating the billing and invoicing process. This can help ensure that invoices are sent out on time and payments are received promptly. Automated systems can also track payments, notify you when payments are late, and provide other reporting features that can help you manage your accounts receivable.

Are you ready to reduce your outstanding payment problem with one simple tool? Book a free Gaviti demo to see what automation can do for your business.

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