Best Practice Guide

How to Collect Unpaid Invoices

While Strengthening Relationships

Proven strategies for collecting unpaid invoices while improving client loyalty

Late payments can silently harm even the healthiest businesses. With automated, consistent invoicing practices, payment collection becomes a process that clients respect and respond to positively, without the awkward conversations.

Download 5 Strategies Implementation Checklist

Did you know?

£22,000

Average owed to UK small businesses in late payments

Source: UK Dept. Business & Trade, 2023

50%

Of all outstanding invoices by value are late

Source: UK Dept. Business & Trade, 2023

73%

Of businesses report improved client relationships after implementing automated AR processes

Source: Paidnice Client Survey, 2025

THE PSYCHOLOGY

Why We Avoid The Conversation

Finance teams and business owners avoid pursuing late payments for several key reasons:

33%

Fear of damaging relationships

29%

Perception that the lateness isn't significant enough

17%

Preference for informal follow-ups

Administrative burden

"Small businesses have had to contend with a global pandemic, which disrupted both daily life and global supply chains, the war in Ukraine and rising costs. With the right invoicing practices, chasing payments can actually enhance customer relationships rather than strain them."

— UK Department for Business & Trade, 2023

KEY INSIGHT

What Are The Real Reasons Your Invoices Go Unpaid?

Customers in financial difficulties

Rising inflation

Rising interest rates

Administrative inefficiency among customers

Regulation and compliance

Supply chain disruption

Intentional ignorance (tactical default)

Climate risk

Geopolitical volatility

Source: Intrum European Payment Report, 2023

"The fear is real. Yet it's also often significantly overestimated."

The data reveals a critical insight: most late payments stem from customers' internal challenges rather than their reaction to payment reminders.

In reality, professional follow-up processes rarely damage client relationships when implemented correctly. What damages relationships most is inconsistency and last-minute desperate attempts.

For finance managers, implementing a structured, consistent approach to accounts receivable isn't just about getting paid—it's about creating a professional financial relationship that customers actually respect.

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The Solution

When you establish clear, automated systems for payment follow-ups, you create a psychological separation between your relationship with the client and the operational aspect of payment collection.

This consistency resets expectations and actually strengthens client relationships through clear communication and professional financial management.

THE AUTOMATION ADVANTAGE

Role Reversal Through Automation

Automating your late payment process creates a psychological separation between you and the collection action. When payment reminders and late fee notifications come from "the system" rather than directly from you, the dynamic fundamentally changes.

"After we implemented Paidnice, we pretty much found the opposite. The client starts phoning us and saying, 'Listen, why are you invoicing me for late payments?'"

— Roman Tepes, Balance My Books

This role reversal is powerful. Instead of you awkwardly chasing payment, the customer proactively reaches out.

The surprising ways automation actually strengthens client relationships

Creates psychological distance – It's not you asking for money; it's just the system doing its job
Ensures consistency – All clients receive the same professional treatment, building trust through reliability
Removes awkward conversations – Replaces uncomfortable payment discussions with predictable processes
Reverses the dynamic – Clients reach out to you proactively, transforming collection into customer service

5 STRATEGIES FRAMEWORK

5 Strategies for Client-Friendly AR Recovery

Successful accounts receivable management isn't just about getting paid—it's about maintaining strong client relationships throughout the collection process. Following industry best practices can transform late payments from a source of tension into an opportunity to demonstrate professionalism.

Drawing from Paidnice's experience with thousands of businesses across various sectors, we've identified five key strategies that effectively balance payment collection with relationship preservation:

1 Set Clear Expectations

2 Design a Graduated Response

3 Automate the Standard

4 Frame Late Fees Properly

5 Create a Resolution Path

Set Clear Expectations From Day One

Your payment relationship begins long before the first invoice. The foundation is built during onboarding and contract negotiation:

Establish transparent payment terms in all contracts and quotes
Explain your payment process during client onboarding
Communicate consequences for late payment upfront (e.g., late fees, discontinued service)
Provide multiple convenient payment methods (bank transfer, credit card, direct debit)

Design a Graduated Response System

Not all late payments deserve the same response. Create a tiered approach that escalates appropriately:

1-7 days

Gentle reminder via automated email

See how to automate reminders with Paidnice

8-14 days

More direct reminder via email and SMS

See how to automate SMS follow ups with Paidnice

15-30 days

Addition of late fee with notification

See how to automate applying late fees with Paidnice

31+ days

Phone call and potential service impacts

See how to automate invoice escalation with Paidnice

Automate the Standard, Personalize the Exception

Use automation strategically:

Automate routine reminders for all accounts
Personalize communication for strategic clients and unusual situations
Create standardized but personalized-looking templates with specific invoice details
Schedule reminders to go out during business hours when they're more likely to be seen

Frame Late Fees as System Requirements, Not Punishments

How you communicate about late fees makes all the difference:

Present late fees as standard policy applied to all accounts
Explain the business rationale (e.g., "to ensure we can continue providing reliable service")
Use matter-of-fact language rather than emotionally charged terms
Emphasize that automated systems apply these fees based on payment dates

Create a Strategic Resolution Path

When payments remain outstanding despite automated efforts:

Develop a script for difficult payment conversations focused on solutions, not blame
Offer payment plans for customers experiencing genuine hardship
Consider early payment incentives as an alternative to late fees
Document all communication attempts for potential legal action

The Implementation Checklist

Implement your own best practices for handling unpaid invoices with our comprehensive checklist covering:

Foundation-Setting

Communication

Automation

Foundation-Setting

Review all client contracts to ensure payment terms are clear and consistent

Create a standardized onboarding process that includes payment expectations

Document your payment policy and share with all team members

Establish clear timeline expectations for invoice delivery and payment

Develop email templates for different stages of the collection process

Create standardized SMS notification content for payment reminders

Define escalation triggers based on payment delay timeframes

FREE DOWNLOAD

Best Practices for Unpaid Invoices Checklist

Download our comprehensive checklist to implement your own effective accounts receivable strategy.

ACTION PLAN

Next Steps: Transform Your Accounts Receivable

Now that you understand the psychology behind late payments, the power of automation, and our proven 5-strategy framework, it's time to put these insights into action. Here's how to begin your payment transformation journey:

Analyze Your Current Relationship Dynamics

Review your late payment history and identify where client relationships may be strained. Are you avoiding collection conversations out of fear? Remember that this fear is often overestimated – most late payments stem from clients' internal issues, not your payment process.

Quick Win: Survey your team about their comfort level when discussing late payments with clients.

Set Clear Expectations in All Contracts

Following our first strategy, update your contracts, quotes, and onboarding materials with transparent payment terms. Create a payment expectations document that clients receive before their first invoice.

Quick Win: Add a clear "Payment Terms" section to your next quote or proposal.

Design Your Graduated Response Timeline

Map out exactly when and how you'll communicate at each stage of late payment (1-7 days, 8-14 days, 15-30 days, 31+ days). Create email and SMS templates for each stage that maintain professionalism and clarity.

Quick Win: Draft a template for your first gentle reminder email.

Implement Automation

Leverage the psychological advantage of automation by setting up a system that sends reminders and applies late fees automatically. This creates separation between you and the collection action, transforming the dynamic with clients.

Quick Win: Schedule a demo with Paidnice to see how automation can transform your accounts receivable workflow.

Monitor, Measure and Adapt

Track key metrics like Days Sales Outstanding (DSO), percentage of on-time payments, and most importantly, client relationship health. Use the Implementation Checklist to ensure you've covered all aspects of effective accounts receivable management.

Quick Win: Calculate your current DSO to establish a baseline for improvement.

TRANSFORM YOUR AR

Ready to automate your accounts receivable?

See how Paidnice can help you collect payments faster while strengthening client relationships. Our team is ready to show you how.

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Personalized walkthrough of features specific to your industry

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Implementation strategies based on your business size

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ROI calculation based on your current AR challenges

Book a Free Demo →

How to Collect Unpaid Invoices While Strengthening Relationships

Proven strategies for collecting unpaid invoices while improving client loyalty

Why We Avoid The Conversation

What Are The Real Reasons Your Invoices Go Unpaid?

The Solution

Role Reversal Through Automation

The surprising ways automation actually strengthens client relationships

5 Strategies for Client-Friendly AR Recovery

Set Clear Expectations From Day One

Design a Graduated Response System

Automate the Standard, Personalize the Exception

Frame Late Fees as System Requirements, Not Punishments

Create a Strategic Resolution Path

The Implementation Checklist

Foundation-Setting

Best Practices for Unpaid Invoices Checklist

Thank You!

Next Steps: Transform Your Accounts Receivable

Analyze Your Current Relationship Dynamics

Set Clear Expectations in All Contracts

Design Your Graduated Response Timeline

Implement Automation

Monitor, Measure and Adapt

Ready to automate your accounts receivable?

How to Collect Unpaid Invoices

While Strengthening Relationships