When operating a business, it is necessary to have a clear idea of your overall cash flow. Therefore, it is crucial to deal with your finances in a timely manner. This includes releasing and receiving payments. Essentially, receiving money on time will allow you to run your business operations smoothly and effectively. However, it can be challenging for you to achieve this if your client has a late payment.
A late payment, commonly known as an overdue payment, is a payment that has not yet been paid even after the deadline or due date has passed. In such cases, you need to find a convenient way to remind your client about the overdue payment politely. You will need to draft an overdue payment reminder letter so as to politely request your client(s) or customer(s) to pay what they owe you. In this article, you will learn more about the following:
- What is an overdue payment reminder letter?
- The importance of this reminder letter.
- How and when to prepare and write overdue invoices?
- Things to consider when preparing an overdue letter.
Overdue Payment Reminder Letter Templates
Overdue payment reminder letters can be challenging to prepare, especially if you are dealing with more than one client. Additionally, the letter should contain accurate details of the client and the payments owed. Therefore, you can use templates to create a detailed and accurate overdue payment reminder letter effortlessly. Our templates can be customized to meet all your requirements.
You can access and download them for free from below:
What is an Overdue Payment Reminder Letter?
An overdue payment reminder letter is a professional document used by businesses to remind customers of any pending or past-due payments. You can send an overdue invoice electronically through email or physically in paper format. This letter is important as it allows you to request pending and overdue payments politely.
Additionally, reminding your customers to clear any pending payments will enable you to balance your finances and run your business operations efficiently.
Note: Most businesses prefer to send an overdue invoices to their customers via email. This is because it is faster and more convenient for most clients.
When Should the Letter be Written?
You can write and send a reminder letter after you have contacted and informed the client about their overdue payments. The letter should be a final notice after various phone calls and email reminders before you decide to take serious action on the matter.
Furthermore, it is crucial to have a payment reminder strategy that will ensure you maintain professionalism and respect as you request the client for past due payments. These strategies will allow you to know when to create and send the letter. When sending the letter, ensure that you attach a copy of the original invoice. This ensures that the client is reminded of how much they owe you.
How to Write Overdue Payment Reminder Letter?
When it comes to creating a proper and effective reminder letter for overdue payments, there are essential details that you must include in your document. The idea is to draft a polite yet straight-to-the-point document that will remind your client to pay what they owe you.
Below is how you should write your letter:
State your reason for contacting them
The first part of your letter should clearly highlight why you are contacting them. Ensure that you address them by name, followed by a respectful salutation. Then, proceed to state your reason for writing the letter. This is where you should notify the client of the overdue payment.
To ensure that you maintain a friendly and polite tone, phrase the sentence in a way that does not make a client the subject of the sentence. This means that the client will not feel embarrassed or directly attacked about the late payment issue.
Provide details about the invoice
The next step is to provide details about the invoice to remind the client of the payment they need to make. Ensure that you include the invoice number and the original date you sent the invoice for easier reference, the cost of the goods or services you provided, and the total amount they owe you. You can also choose to include a reminder of previous letters.
Additionally, it is important to include the payment details to make the payment process easy for them. You should include your organization’s payment terms, such as expected fees for late payment, payment methods such as credit card or check, and instructions for payment. At this point, you need to establish if there will be extra charges for them to pay, apart from what they have incurred so far if they fail to make the payment by a certain date.
Offer to resend the invoice
You should then offer to resend the invoice in question, as this will be helpful for those clients who have lost or misplaced the original copy. Once you have suggested this, proceed to attach a copy to act as proof that the payment is overdue since it will display the due date. It is better to send the invoice as a PDF file for easier viewing.
Write a welcoming statement to answer any question
Finally, end your letter with a welcoming statement that shows the client that you are available for further questions or any concerns regarding the overdue payment. You can suggest a follow-up phone call or an email meant to discuss any issues about the invoice or the client’s payment plans. This will encourage them to make the payment as they will be aware that you will take action if the late payment is not made within the provided time frame.
At this point, conclude your letter using a professional complimentary close and signature.
An Overdue Payment Reminder Sample Letter
Spotless Cleaning Crew Company
629 Here Avenue
222-555-9999
15th November 2022
Irene Williams
102 Higher Road
Subject: Overdue Payment Reminder
Dear Irene Williams,
I am writing this letter to notify you that I have not received payment for my last invoice. The invoice number is 102-45, and it was sent on 24th October 2022. As Spotless Cleaning Crew, we offered you our cleaning services on 22nd October 2022 at your residential home and then sent you the invoice.
It has been two weeks now, and as per our company policy, the payment is considered late. That means that apart from the $300 dollars owed for the services, an additional $25 is required as late fees. Acceptable payment methods include a check, credit card, debit card, or cash. To avoid future late payments, you can automate your payment by clicking the link provided www.spotlesscleaningcrew.automatepayment.com and following the payment instructions included.
Unless there is a mistake, I believe that the mentioned invoice is yet to be paid for. We can send you a copy of the invoice or attach it to this letter for reference purposes. The invoice will clearly indicate that the due date was on 1st November 2022. Please feel free to reach out to us by email at [email protected] or by calling us at 222-555-9999 for any questions or concerns.
In case we do not hear from you within a week, I will contact you via phone call.
Sincerely,
Mark Adams
[Signature]
Best Strategies for Writing Overdue Payment Reminder Letter
When writing a reminder letter for overdue payments, there are some strategies you should use to ensure that you have an effective and professional document.
Here are some of the strategies you should apply when it comes to this type of reminder letter:
Send in a timely manner
Always write and send your overdue letter in a timely manner. This will increase your chances of receiving the payment. The best way to do this is to use an email to remind your client of the payment and then follow up with an overdue invoice letter if you receive no payment. The email should be sent shortly before the due date to ensure the client remembers the payment deadline.
Remind your late payment policies
When sending a reminder letter, it is best to include your late payment policies to remind the client about what they will have to incur if there is a delay. It is important to establish these policies earlier on in your contract with the client as this will prompt them to make payments within the due date. Late payment policies can include interest rate charges on late invoices.
Provide online payment options
Also, you can provide your clients with online payment options to make the process more convenient and accessible for them. Include these payment options on their invoice to make them aware that your business accepts online payments. Also, include all other payment options that you accept. This way, you will reduce the chances of late payments.
Follow up proactively
It is also important to have a follow-up schedule that ensures that you take control of the situation before it becomes an overdue payment. Based on your relationship with the client, you might either need to follow up on the payment or not. For long-term clients that you have been working with for years or clients who pay in a timely manner, you may not need to follow up.
Nonetheless, for new clients or clients who have delayed before, you might need to remind them of the due date or even an overdue payment.
You can follow up proactively on your clients by:
- Sending a reminder letter a day after the payment is late, especially for late clients.
- Sending a notice a week or two after the invoice is due, especially for new clients or timely clients.
- Reminding the client at 30, 60, and 90 days past the due date.
- Either sending an invoice on the weekend or during the week, on Tuesdays before/after lunch, to grab their attention.
- Sending an overdue invoice letter for multiple clients at once to save time and effort.
Charge late payments
You can also charge fees for late payments on clients’ overdue accounts. To enforce this aspect, ensure that you inform the client or customer that there are penalties or charges for overdue payments. The sudden penalty of late payment will damage your relationship with the client.
Also, ensure that you inform the client of the exact additional fees that they will incur, usually 7 to 10% of the total due. The penalty is usually a percentage of the total amount owed. Before you decide on the percentage, ensure that you confirm with your state laws.
When it comes to late penalties, it is suggested to enforce those charges from the first overdue invoice. This creates a precedent for your business and prevents the customer from making late payments since they know that you expect to be paid on time.
Offer discounts and payment plans
In some cases, several reminder letters and penalties might not be the solution for overdue payments. You can entice your customers by offering them discounts for early payment. In case the due date has passed, you can offer your clients a suitable payment plan that works for both you and the client.
Depending on your business, you can choose to divide the total due into smaller payable parts and set a date for partial payment every month. This works for cooperative clients who will choose to contact you, explain their situation, and agree on a workable payment plan. Payment plans guarantee reduced debts and increased cash flow into your accounts receivable (AR).
Use a polite tone
Always write your past due payment letter in a polite tone. Being humble helps to protect your relationship with the client, shows professionalism, and maintains a positive brand image. Use phrases like thank you or please when writing your overdue reminder letter.
Automate payment reminders
Since it is important to send payment reminder letters as soon as possible, it is best to use automation software to make this process easier. Keep in mind that remembering all those due dates manually can be challenging and strenuous. That means using invoicing software that not only reminds the client of the payment but automatically adds penalties and sends them overdue payment reminder letters is an efficient way of operating your business.
The most professional way of setting these reminders on your invoicing software is using the 1, 15, 30, 45, 60, and 90 days past due time plan. Such software also promotes organization and decreases late payments.
Get help
At some point that is 90+ days past the due date, you might need to get help with the late payment. Once you have sent an overdue invoice letter, you can reach out to a collection agency or take legal action against the client. If you choose to take the client to court, ensure that the invoice payment is worth the expected court fees, time, and effort.
To reduce these court fees, you can choose to take your lawsuit to the small claims court. You can also avoid hiring a lawyer if the total owed is less than the State’s maximum limit. Apart from that, you can reach out to the party’s account manager or hire a mediator to resolve the matter, especially if it is a colossal amount.
Adjust your language
Finally, always adjust your language when writing this type of letter. Depending on the time frame of the overdue payment, you will have to tailor your reminder letter. Apart from the number of days past the due date, you also need to check the situation and adjust your language accordingly.
For instance, a 30-day past due date invoice should receive a differently structured reminder letter as compared to 90+ days past due date reminder letter. Also, a client who has reached out and explained their reasons for no payment past the due date should receive a differently tailored letter as compared to a client who has not communicated with you and has failed to respond to any of your overdue invoice letters.
How to Avoid Overdue Invoices
Unpaid or pending invoices can have a significant effect on how you run your business. Therefore, it is beneficial to any business when clients complete their payments once they have received their requested products or services.
There are techniques that you can use to avoid overdue invoices. Here are the different methods that you can use:
- Contact or email the client before the payment date is due. It is crucial to send a payment reminder to the client before the due date; this is an effective way of ensuring the client is aware of when they are supposed to complete their payments.
- Inform the client of late payment penalties. This information is crucial as it politely informs the customer that they will have to pay interest or face other forms of penalties if they fail to make their payments on time.
- Entice your clients to make early payments. Offering your clients discounts or rewards will encourage them to make their payments early or on time.
- Ensure that the invoices are detailed and well-prepared. An accurate invoice will allow the client to know when and how to make their payments. Any errors in the invoices may result in inaccurate or delayed payments. Therefore, using invoice templates will ensure that you have not omitted any important information.
- Submit your invoices as soon as you deliver the requested products. It is crucial to send your invoices early; this allows the clients to make the much-needed payments as soon as they receive their products.
Frequently Asked Questions
What tone should be used in an overdue payment reminder letter?
The tone used throughout the letter depends on the type of relationship you have with the client. However, regardless of the relationship, the letter should be written in a formal and professional tone. Note that you should maintain politeness and respect when crafting the letter.
How can you draft overdue invoice emails?
You need to have the email address of the client for you to draft an overdue invoice email. An email is generated in the same way as a letter. The only difference lies in the subject line. The subject line in the email should outline how urgently the payment is needed.
What is a checklist for writing overdue payment reminders?
An overdue payment reminder letter should contain the following information:
-An invoice number
-The date the letter was issued
-The total amount due
-A mention of the letter sent previously
-The preferred payment methods
-Your contact information
-Name and contact details of the client
-Payment terms
-Any other necessary terms and conditions