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Automated overdue invoice reminders and automated late fees

Most of our clients pay their invoices on time but a number are always late...

Would be great if xero could send reminder emails following up on invoices marked as unpaid, say 7 days out from its due date...

"Quick courtesy email letting you know your invoice is overdue. Please remit payment asap. "

we've had late fees as part of our payment terms for a while, we don't really want to have them, but we can't act as a line of credit

therefore we find the threat/presence of them quickly motivates clients to pay their account.

but its been a pain to apply them manually and consistently

would be great if xero could apply late fees automatically like anumber of other accounting/billing apps

so combined with automated reminder for invoices appreaching due date, message would be something like

"Quick courtesy email letting you know your invoice is overdue. Please remit payment asap. Late fees apply at 31 days overdue"

And then on day 31, a new line is added to the invoice that is overdue

for example... Late fee $30

invoice retotalled and saved, then invoice is resent

feel this would pretty quickly sort out the late payers if they saw this happening automatically,

would also allow us to say "sorry its out of my hands, our billing system applies them automatically, you will just have to pay your invoices on time"

Feel this would be an useful feature for xero to implement, many people im sure could do with some help following up debtors.

Thanks

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Permalink Reply by Kym on March 5, 2012 at 0:18

thanks Chris

when do you think you will have automated penalty charges ready?

if you could update this thread as it gets coloser that would be great

think it would be an awesome feature and a reaosn to move to your service

otherwise as it stands wed stay where we are with debtordaddy

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Permalink Reply by Josh from xocashflow on March 9, 2012 at 8:10

Hi Kym,

This is a great idea and one that could be implemented, with care.

For a little background info, we're due to launch an automated invoice follow-up app named "xocashflow" on Monday. This is exclusively for Xero users and is more affordable than other add-ons in the marketplace.

Adding this functionality is possible. The trouble is that editing existing invoices creates accounting issues for companies that are using accruals-based accounting. It's also not legal in some circumstances, depending on the terms and conditions that were agreed upon when a client engaged the supplier, so there is a delicate balance to walk in order to deploy this within a product that is used by a diverse range of companies.

If an invoice was issued in the previous financial year or previous BAS reporting period, for example, and it is ammended after-the-fact to include a new line item accounting for a late payment fee, that might result in you having to put adjustments through as journal entries or in your next BAS/IAS filing; making the process a headache for many businesses.

I love the idea, but want to brainstorm as to whether there's a better way to handle this.

1. Would it work for you to have the old invoice voided and a new invoice automatically created that includes the late payment fee? This would still require adjustments for those using accruals-based accounting, but could be easier to track.

2. Alternatively, what if the system created a new invoice that only included the late payment fee, keeping the old invoice intact as is, while referring back to the old invoice via a line entry in the description.

Would either of these solutions work for you? The second would be the safest and simplest to implement.

Kind regards,

Josh

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Permalink Reply by Kym on March 9, 2012 at 9:56

hi josh, wow thanks for the detailed reply, sounds like you get what im trying to suggest and then some. Im no accountant (it was the one unit i failed at uni years ago!) so hadnt thought of the ramifications as you explained. Hmm

Im always trying to streamline and automate my business processes, and from an accounts perspective "gently" remind clients that we arent in the business of providing a line of credit beyond agreed terms. Using Debtor Daddy has darmatically decreased our accounts receivables over the last few months of use so like you i know this stuff works, although more focus from our accounts person has also assisted in this so cant say its only a result of Debtor Daddy, but a combination of the two perhaps.

I feel by showing clients late fees will be definitely-and-methodically-automatically applied it would quickly teach them that they cant rely on our busy-ness in other areas to push the due dates etc,

Go beyond 30 days and the late fee is automatically applied "Sorry its all automated now so we can spend more time on helping clients and less time on chasing these late payments, all I can suggest in fuure is to please pay your invoices in time!"

I feel if this is said nicely enough clients will understand and realize we cant be played, delay payments to the next guy if you have to just not us...bad news for other debtors who dont have such a tight system but thats their problem :)

Id reckon that once a client cops an auto late fee in this way and perhaps first complains at our audacity, theyd get this friendly factual repsonse which would be given gently, reference the conditions in their payment contract and therefore hard to argue with. We could of course waive it also if we felt the message had been received

The result is clients paying invoices on time in future or they just wear the late fee as a penalty while they sort out their cash flow...

Anyway rambling a bit, get excited about an automated process like this... and bringing acc rec total and assoc costs down to practically nothing...

We are only a small business (our accounts dept is basically one person) so any time we spend chasing these smaller amounts takes us away from better pursuits...

To (finally) answer your question id be okay with either suggestion 1) or 2), as long as its all automated!

If you could combine the auto invoice follow up email series of debtor daddy (hmm think its 5 email in the series? with each proressively more demanding) with some teeth in the form of automated late fees I think youd be on to a killer app for many businesses using xero

At $10a month its a great price, so then like lots of things then just a case of getting the service known.

Did a quick search of XOCashflow and found your youtube beta vid, notice you guys are a web dev/ marketing company in Gold Coast, we are a similar company (albeit smaller) in Byron Bay.. small world!

Be super keen to check it out on Monday, if it does everything Debtor Daddy does and is cheaper well wed jumop ship for sure. Certainly happy to give feedback, assist in its development as it will no doubt benefit my business to do s, perhaps drop in on you guys for a chat when im next in the GC!

thanks again for your time
looking forward to your response
Kym

PS Friday nights at home, researching business automation... ha the funny thing is even after 10 years at this game i still love it! Seems you guys do too!

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Permalink Reply by Euan Chisholm on March 12, 2012 at 12:24

Hi Kym

We've just launched an accounts receivable module for spendgate.com. We can handle the automated reminder emails for you, you can set Spendgate up to send out reminder emails before the invoice is due (defining the number of days prior to the invoice due date) then further emails after the invoice is overdue. No ability to apply late fees yet though. We also have a scripting system - when you have to chase an invoice manually you can capture crucial payment information quickly and efficiently reducing the time spent on manually chasing. Full features are here: http://spendgate.com/features/accounts-receivable/

Up to three invoices per month is free, you can chase an unlimited number for GBP 10 per month. This also gives access to our accounts payable service.

We will be launching enhancements to the service over the coming quarter - allowing distribution of automatic reminder emails, hard copy letters etc too.

Best regards

Euan

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Permalink Reply by Tabitha Harris on March 18, 2012 at 18:17

Hi kym,

When you get sick of the reminder service we have online collection services that could help. We have been listed as an add on partner with xero and feel we might have some economic solutions for your outstanding accounts.

Cheers
Tabitha Growden

www.debtforce.co.nz

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Permalink Reply by Josh from xocashflow on March 19, 2012 at 1:13

Hi Kym,

Sorry for the late response. We had a very hectic week last week after finding out on the eve of launch that the billing system we had in place to handle monthly subscriptions (PayPal Website Payments Pro) doesn't yet support recurring billing for Australian merchants. We scrambled for a few days to replace this with Website Payments Standard and actually launched on Thursday.

Despite the delay, xocashflow is now live and operational (https://www.xocashflow.com). We're even going to use it within our own business from today - to chase up a massive 280 overdue invoices. Debtors watch out!

Your suggestions in regards to the late fees have been great. We'll look to implement Option #2 in the coming months. This will make it possible to automatically create the overdue payment invoices and depending on whether Xero has the HTML versions of their invoices ready by that time, it may even be possible to automatically send the new invoice to your debtor. Otherwise, they'll be sitting in your "Drafts" folder ready to manually send those that you want to go out and to turf those that you'd prefer not to send (for VIP clients, for example).

It's great to hear that you're just down the road in Byron Bay. That's an amazing spot.

Hopefully we'll have you on board as an xocashflow client soon. If not, I'll let you know once we have automated "late fee" invoice generation in place so that you can test out the feature then.

Kind regards,

Josh