Past Due Notices: Tips & Templates for Late Payment Letters

Getting paid by your customers is critical. With a low cash flow, businesses face the risk of having to close down. Being proactive in your Accounts Receivable collection is a must. 

When it comes to late invoice payment, the more days that have passed since your payment due date, the lower the probability is that your invoice will ever get paid. 

Being effective in your communications with your customers is therefore essential. On top of emails, formal notices like letters can be a good way to encourage your customers to pay sooner rather than later. Keep reading to find out:

• The Meaning of "Past Due"

• The Strategy for Late Payment Letters

• What to Include in a Past Due Notice?

• Late Payment Notice Templates

With Upflow, you can automate your collections emails and also send letters requesting payment to your clients in just a few clicks. Click on the banner below to download our top collection email templates

Past Due Meaning

For invoices, "past due" refers to payments not made by their agreed-upon due date, signaling an overdue balance requiring immediate attention. Delayed payments can lead to late fees, interest charges, or strained business relationships. While companies often use standard payment terms, like 30 days post-invoice, businesses may negotiate flexible terms or payment plans for regular clients.

Under the European Late Payment Directive, enterprises must pay invoices within 60 days unless alternative terms are agreed. Beyond 60 days, a statutory interest of at least 8% above the European Central Bank’s reference rate and a €40 minimum compensation charge apply.

For startups, promptly addressing past due invoices is vital for maintaining healthy cash flow and strong client relationships. This makes it essential to have a clear late payment letters strategy for addressing overdue payments effectively.

The Strategy for Late Payment Letters

When to Start Sending Past-Due Notice Letters?

Sending past-due notice letters work best when you’ve already tried to contact your customer about their late payment - by email and/or phone calls. 

A past due invoice letter is a great way to make matters more official. Used as a follow-up of other past due notices, letters requesting payment convey a sense of urgency. They show you're taking the situation seriously, and so should your clients.

Knowing when exactly to send them depends on your overall payment reminder strategy. 

You might decide to use letters as the last notice before escalating the matter, or you could use them early on when the payment becomes one month overdue, for example. 

What Tone Should You Use in Letters for Late Payment? 

A past-due notice is a friendly reminder to your clients that they haven’t paid yet. As time goes by, we recommend getting more assertive (but still remaining polite). This is true for collection letters and collection emails, too.

Since we're in the digital age, letters are seen as more formal. Start with a polite greeting like “Dear Sir or Madam” and stay formal in the body of the text too - we talk below about the specific elements to include. 

Last but not least, your tone should reflect the nature of the relationship you have with your customer. A long-term customer might be offended by too much formality, while a new one might feel more valued by it. 

All in all, it’s best to have several payment reminder templates for different accounts or subgroups of accounts. You could have one for long-term customers, one for those who pay via a specific payment method (online payment, credit card), etc. 

Being specific will not only help you maintain the relationship in a potentially tense situation; it will also make your follow up more effective. 

Need help setting up your collection strategy? Start looking at the right A/R metrics!

What to Include in a Past Due Notice?

Regardless of the tone and the context in which you send your past-due notice letter, there are a few elements that should always be included: 

• Personal information: Includes the name and company name of your contact, as well as your business’ name. Being personal means ensuring your contact knows the letter is addressed to them (i.e. it's not a mistake) and also serves as a reminder of the services or products you’ve provided. 

• Contact information: include your address, email, and phone number so they can easily contact you if needed. 

• The original invoice: print and send a copy of the original invoice so they can refer back to it. Also include the invoice number and the amount due in the letter requesting payment (if there is more than one, make a list). 

• The original invoice due date: highlight the number of days past-due by including the due date of the original invoice.

• The past-due invoice: if you charge a late fee, include it in an updated invoice that you attach to the letter and whose total amount and number you have referenced in the letter as well.

  
  

• Your payment methods: include specific instructions on how your customer can pay you right away. This could be a link for online payment where they can pay via credit card or your bank account number. The more payment options, the better. 

• A payment plan (optional): suggest a payment plan with weekly or monthly payments to make it easier for your clients to pay you. 

• Your next step: remind them of the next step you will take if they don’t pay within a certain time frame - limiting access to your solution or service, or taking legal action. This could also include a warning around accumulating late payment fees (or a mention that you'll have to use a collection agency). You can cite your T&Cs and/or your contract.  

Late Payment Notice Templates

Now that you know how, when and what to include in a letter requesting payment, let’s have a look at some specific payment reminder templates. Below, you’ll find three templates with slightly different tones and content to suit different situations. 

Payment Reminder Template for New Customers

With new customers, you want to make sure they’ve understood how to work with you and how to pay you. It might be that they didn’t get your payment terms right or simply that they’ve forgotten to pass your invoice to the relevant person in their company.  

Regardless of the reason, it’s a good idea to remind them of what your T&Cs are and to clearly lay out your payment terms and methods. 

You can also include a prompt to automate their future payments, which makes sense if you have a subscription-based business model.

We also encourage you to open the conversation by mentioning they can contact you if they have any questions about how your business operates. 

Here is a payment reminder template letter to get you started: 

Payment Reminder Template for Long-Term Customers

If a long-term customer hasn’t paid you, you would probably assume one of two things: 

1. It’s a mistake and they have forgotten about it.

2. They don't have the funds to pay you.

Either way, sending them a formal notice should open the conversation and make it a priority for them. 

Depending on your business model, it can make sense to involve your sales representative or account manager in the process, earlier rather than later. 

Here’s a template letter you can use: 

Payment Reminder Template for a Final Notice

The last notice letter is the ultimate way to bring attention to the non-payment of an overdue invoice. If you have a red stamp handy, this is when you should use it! 

These final notice letters should be used in only the most dire situations, when you’ve tried repeatedly to contact the customer over a long period of time (say, 60 or 90 days overdue).

In most situations, this letter would solve matters quickly. If not, be ready to follow through with concrete actions. 

Here is a sample final notice collection letter you can use: 

Key Takeaways

• Formal letters requesting payment are a great way to add some urgency to your communications regarding unpaid invoices. They should be used after several attempts to contact your client by email and phone call.

  
  

• In essence, letters are more official than emails and their tone will be more formal. We still encourage you to be as personal and specific as can be, both to be more effective and for better financial relationship management.

• Include all the necessary information your client needs to pay you straight away. The easier you make it for them, the more likely they are to pay you straight away.

  
  

• Offering a payment plan can be a solution to get your client to get back to you, as it can help with a cash flow problem. 

  
  

• It’s better to have several template letters for different situations, like a new client, a long-term client, or a past due account that needs to be escalated further. 

• In order to focus on accounts that need more attention, you can automate your collection letters (and emails!) by using a solution like Upflow.