12 Perfect Payment Reminder Letters to Start With

Most businesses are client-centred, meaning they provide goods and services that cater to their client’s needs. Therefore, you must attract and maintain a good client base in providing goods and services as a business. Consequently, good business practice demands that you keep a good record of your accounts, including debts and profits. Therefore, for every good or service delivered, you must follow up and record payments made by your clients.

However, you may find it difficult to follow up with clients’ overdue payments as you have to maintain a good relationship with them. For example, you may have sent an invoice or a reminder, but your client has yet to pay, and you are wondering how to ensure you will receive the payment. One of the most professional ways to request payments is through a payment reminder letter. This letter is official communication as it allows you to request payments from your clients without nagging them.

This article discusses these payment reminder letters. It explains what you should consider before writing it, how to write and what information your letter should contain. It also gives tips and tricks to make your letter effective and provides samples and templates as a guide.

Stats: Since the onset of the Covid-19 pandemic in 2019, there have been changes worldwide in the late payment of invoices. The following are the changes in June 2020 as compared to December 2019; in Romania, late payment decreased from 12.9% to 8.2%; in Portugal, it dropped from 11.6% to 9.6%; in Greece, it increased from 9.0% to 9.3%; in Croatia, the rate remained 5.5% for both months; in Turkey, it decreased from 7.9% to 6.1%; in Italy, it increased from 3.0% to 3.3%; in Spain, it increased from 3.2% to 3.3%, and in France, it increased from 3.2% to 3.3%.

You may have to send many reminder letters at once, especially if you have many customers. Most reminders contain standard information, and it may be time-consuming to draft them from scratch each time you need one. Instead, you can use a template to write these letters as they are editable, and you can change them to suit your needs. They can help you save time.

Below are free downloadable payment reminder letter templates for your use:

What is Payment Reminder Letter?

A payment reminder letter is a notification you send to your customers to prompt them to submit overdue payments.

It is a polite way to remind your customer of a due payment. However, you are encouraged to use a reminder letter because, beyond being friendly and polite, it promotes quick action from customers. A business may have three types of payment: fixed recurring payments, irregular or variable payments, and customized services.

Fixed recurring payments are automatically withdrawn from the customer’s account at pre-decided times. A letter is issued when the business cannot successfully obtain payment because the customer’s card has been declined or the account has no funds.

Irregular or variable payments are made for products that vary according to a customer’s usage rate, for example, utility payments or advertisement bills. They can be paid automatically from the customer’s account, or the business can issue an invoice.

Customized services are those offered to cater to a customer’s specific needs. They include services offered by law firms, consultancies, and other personalized services. Such services are billed after the client receives the service. 

Statistical insight: On average, businesses spend 15 days per year following up on overdue payments. On the other hand, freelancers find it more challenging to get paid on time. According to the Freelancer’s Union, about 71% of freelancers do not get paid on time.

Before issuing a reminder, you need to consider some factors to ensure your letter will prompt the client to send your payment. The effectiveness of your letter also depends on how you balance issuing your request for payment to the customer while being polite to them.

The following are some of the factors you should consider:

Decide on the follow-up timing

It would be best to decide when and how regularly you should follow up on payments. Like any other business decision, you need to strategize whether you will send a reminder before or after the payment is due. A well-thought-out strategy for following up gives you structure and keeps you organized. Further, it also helps you regularize your communication with customers. Two ways to send a reminder letter are via mail or phone call.

While direct mail may seem outdated, its personalized nature increases the chances of a response from your customer. You can also use technology through automated direct mail systems which automatically verify addresses to ensure your mail reaches the correct recipient. On the other hand, phone calls are not as popular, but they are effective.

They are used when the customer fails to respond to your reminders sent through the mail. Since they are used for direct communication, they allow you to reach the customer immediately and alert them that their payment is overdue, especially when, for some reason, they may have failed to receive your mail.

Stats:

According to a study by MYOB, your customers are more likely to pay for goods and services after receiving a reminder; this possibility decreases after the fourth reminder.

The following are the statistics established by this study:

• 21% of customers pay after the first reminder is issued
• 20% of customers pay after the second reminder is issued
• 32% of customers pay after the third reminder is issued
• 13% of customers pay after the fourth reminder is issued
• 10% of customers pay after the fifth reminder is issued
• 3% of customers pay after the sixth reminder is issued
• 0.5% of customers pay after a demand letter is issued
• 0.5% of customers pay after being pursued by debt collectors

Acknowledge your business value

Payment reminders might be difficult to issue, but you must acknowledge that the services and goods you provide are valuable. In addition, you have probably spent time and money to deliver services to your client to satisfy them; as such, you should be compensated for your effort.

Recognize your narrative

You may feel awkward about reminding your customers of overdue payments. However, it is crucial to consider that the relationship between you and your customer is based on completing obligations. As such, your customer may question the progress of their order from time to time, and consequently, you may ask them when they will pay.

Once you have decided how and when to send your payment reminders, you can begin writing them.

Your reminder is meant to ensure payments; as such, you need to include the following details so your customer knows why you have sent the reminder and how to pay:

Include invoice details

The invoice is a record of the transaction between you and your client. The reminder should have enough details for your client to identify what payment they need to make. This information is necessary as some clients may be processing many payments, and these details make it easier for them to process yours.

The details should include the following:

• Legal name and address of the company: The company’s legal name and address help the client verify whether they have dealt with you as a client. You should also include this detail as it is part of your business brand.

• Name and address of the customer: You should ensure you provide the proper name and address of the customer to ensure your mail reaches the correct recipient. If you use the wrong name, your mail may be misplaced, and your customer may fail to make payments.

• Invoice date and number: The invoice date and number are essential for the identification of the transaction. Invoices are always kept for record purposes; as such, the invoice date and number on the reminder help the customer identify the transaction from other businesses they may be dealing with. In addition, the date is essential as it may be used as evidence that the date for payment has lapsed hence why the reminder is being issued.

• The client’s number: The client’s number is crucial as it is one way of keeping their records. In addition, the reference number could have been used in previous communication with the client; it can help them identify your business on their records.

Specify the date of the letter

Besides common practice, indicating the date you wrote the letter is crucial because reminders are time-sensitive. In addition, the date can help you clarify to the customer that the agreed-upon time has passed, and they need to ensure they have paid; this is especially true for second and third reminders.

Add a subject line

Your subject is one of the most notable things about your letter; it should provide enough information about the rest of your letter. In addition, it should contain the reason why the letter is being sent, and the number of the reminder, especially for subsequent letters after the first has not been responded to.

Identify the purpose of the letter

While it is clear that the letter is a reminder, you need to be specific about the type of reminder. For example, it would be best to mention that it is a first, second, or third reminder. Each reminder is written to request payment, but critical details like the letter’s purpose, tone, and language might vary depending on how many times you have written it.

Add new payment due date

Once you have stated the reason for your letter, you should mention when you expect payment. The new due date is essential as it helps the customer prepare their funds and communicate when they will pay their debt to you.

Mention overdue amount, including taxes and discounts, if applicable

Some transactions may result in extra charges or discounts. If your transaction falls under this category, you should inform your client of any extra charges, taxes, or discounts for which they should pay. Since the overall objective is to alert your client, you should provide a breakdown of additional charges, taxes, or discounts which the customer can easily verify.

Include the description of the services that have been provided

For ease of communication, you should state the services that led to the issuance of an invoice. The reminder helps to clarify your position with the client. It also acts as a record of services provided and the charges that arose as a result. You should describe your services to allow the client to understand why you are sending the reminder.

Add a CTA

The call to action tells the customer what steps to take after reading your letter. It encourages them to respond to you and make the required payments.

Sign off

Once you complete the letter, you should sign off. Some official ways of signing off include: “sincerely” and “yours faithfully.” Additionally, you should append your signature and write your name or the name of an authorized officer in the business.

Payment Reminder Letter Samples

We have provided two sample reminders to help you write your own. The first sample is a reminder sent before the invoice is due, and the second is a reminder sent after payment is due.

Now that you can write your letter, you may need to make it unique to increase your chances of getting a response. While they may be effective, some reminder letters may not receive a response.

The following tips can help you prepare an effective reminder letter:

Keep it simple and professional

Reminder letters are official communication; as such, they should be written professionally. You can communicate the urgency of the letter by using a professional tone. However, it would help if you avoided using emotive language.

Be straightforward

A reminder is meant to alert the customer of an overdue payment. The reason for the letter should be mentioned in simple and concise terms. You should ensure you only provide factual information that the customer can verify.

Make your message branded

You should use the official business letterhead and logo in your letter to verify the legitimacy of your reminder. Most customers may be cautious of fraudsters and, without an official logo, may assume your letter is a fraud scheme. 

Charge extra for late payments

You can prevent late payments by informing customers that there will be additional charges for late payments during the transaction. This method is effective as most customers may not want to pay the extra charges. Therefore, it is essential to inform the customer of these charges and how they will be calculated to avoid creating tension between them and your business.

Reattach the invoice

You may have already given the relevant invoice details in the letter, but you should attach them in case the customer failed to receive them previously. If you send the reminder as an email, you may include the invoice as a link that the customer can access.

Sometimes customers may fail to respond to your letter. This failure could be because of miscommunication or because other methods you have used are ineffective.

Some of the reasons why your letter fails to work are the following:

Changed email address

Your reminder may be ineffective because you sent the letter to the wrong email address. While this is not common, it happens. Your email could also have gone to the customer’s spam folder. You can check whether the email went to the right place by comparing the address with that of the customer. You may grant the customer an extension on time even though they knew when the payment was due.

Wrong person or department

Large companies often have payment processing procedures. If you fail to receive a response, it could be that the letter has been addressed to the wrong department. While this is an internal issue, you will suffer a loss if you do not get your payment. You can follow up on the payment by contacting the company to confirm whether they have received the invoice.

Letter is not received by the client

In cases where you are sending direct mail, it could be that the client has not received your letter. Therefore, it is advisable to contact the client by other means, including a phone call to confirm that your client has received the letter.