Past Due Notices: write the Perfect Letters to Get Paid
Aug 1, 2022
Getting paid by your clients is critical. With a low cash flow, businesses face a concrete risk of closing down. Being proactive in your Accounts Receivable collection is therefore a prerogative.
When it comes to late invoice payment, the more days have passed since your payment due date, the lower the probability of your invoice ever getting paid.
Being effective in your communications with your clients is consequently essential. Rather than emails, formal notices like letters can be a good way to encourage your customers to pay sooner rather than later.
What should a notice letter contain?
What tone should be used?
When to start sending reminder letters?
Keep reading to find the answers, as well as letter templates you can use right now.
With Upflow, you can automate your collections emails and also send letter reminders to your clients in a few clicks. Streamlining your A/R collection process means you’ll find the perfect balance between being productive and being personal with your clients.
What Strategy Should You Adopt for Past Due Notices?
When to Start Sending Past Due Notice Letters?
Sending past due notice letters works 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, notice letters convey a sense of urgency. It means you take the matter seriously, and so should your clients.
Knowing when to send them exactly depends on your overall payment reminders strategy.
You can decide to use letters as the last notice before escalating the matter, or you can decide to use them early on when you reach a month of overdue payment for instance.
What Tone to Use in Letter Notices?
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 always remain polite). That’s true for collection letters and collection emails, too.
Since we live in a digital age, letters are by essence more formal. They start with a polite greeting like “Dear Sir or Madam”. With the body, you want to stay formal 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 client. A long-term client might be offended by too much formality, while a new client might feel more valued by it.
All in all, it’s best to have several letter templates for different clients or subgroups of clients. You could have one for long-term clients, one for clients who pay via a specific payment method (online payment, credit card), etc.
Being specific will not only help you foster the relationship in a delicate situation; it will also make your work more effective.
Need help setting up your collection strategy? Start looking at the right A/R metrics!
What to Include in Post Due Date Collection Letters
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 in them:
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 numbers in case they want to contact you.
The original invoice: print and send a copy of it so they can refer back to it. Also include the invoice number and the amount due to the notice letter (if there is more than one, make a list).
The original invoice due date: highlight the number of days past due by writing down the original invoice’s due date.
The past-due invoice: if you charge a late fee, include them in an updated invoice that you’ll join to the letter and whose total amount and number you’ll reference in the letter as well.
Your payment methods: include specific instructions for your client to pay you right away. This can look like 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 step you may take if they don’t take action within a certain time frame - limiting access to your platform or taking legal action for instance or that they might accumulate late payment fees (or having to use a collection agency). You can cite your T&Cs and/or your contract.
Templates of Past Due Invoice Letters.
Now that you know how, when and what to include in a notice letter, let’s have a look at concrete templates you can send. You’ll find 3 templates slightly different in tone and content to suit different situations.
Notice Letter Template for New Clients.
With new clients, you want to make sure they’ve understood how to work with 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, so they can rectify that.
You can also include a prompt to automate their future payments, which makes sense if you have a subscription-based business.
We also encourage you to open up the conversation by telling them to contact you if they have any questions about how your business operates.
Here is a notice template letter to get you started:
Object: Payment Not Received for (XXX) Invoice.
Dear Sir/Madam (or To Whom It May Concern),
I am contacting you as part of our outstanding invoices follow-up. The invoice number (XXX) of (XXX) for (service or product provided) was due on (due date).
Unless mistaken, we still haven’t received payment for the above. You will find a copy of the original invoice attached to this letter.
Can you confirm that this invoice has been recorded by your accounting department and give us an estimated payment date?
To pay this invoice, you can (payment instructions).
To prevent any future late payments, you can also choose to automate your payment by (payment instructions).
We are also available to discuss any issues or questions you may have about our company.
(Your contact info)
Past Due Invoice Letter Template for Long-Term Clients.
If a long-term client hasn’t paid you, it’s safe to assume that:
It’s a mistake and they have forgotten about it.
They don't have the funds to pay you.
Either way, sending them a formal notice should open up the conversation and make it a priority for them.
Depending on your business model, it can make sense to involve their sales representative or account manager in the process, earlier rather than later.
Here’s a template letter you can use:
Object: Unpaid Invoices
Dear (Client Name),
We hope that all is well with you.
(We / Sales Executive name) have tried to contact you several times regarding your outstanding invoices follow-up.
Your current outstanding balance with us stands at (total amount), of which (amount) is overdue. Your older invoice is overdue by (days overdue).
You will find a copy of the original invoice with this letter (as well as an updated invoice that includes our late fee).
We would appreciate a swift payment to settle this matter. To pay this invoice, you can (payment instructions).
We are happy to discuss any issue you may have to find a mutually agreeable solution as soon as possible.
(Your contact info)
Template Letter for Final Notice.
The last notice letter is the ultimate way to call your client’s immediate attention to the non-payment of their overdue invoice with you. If you have a red stamp, that’s when you should use it!
They should be used in the direst situations, when you’ve tried repeatedly to contact them 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 template you can use:
Object: Last Notice Before Legal Action.
Dear (Sir or Madam),
Despite several reminders sent, your company has not paid yet the following outstanding invoices:
(List of invoices with reference numbers, amount and due date)
You will find a copy of all the aforementioned invoices with this letter.
You can pay us directly by (payment instructions)
We have already (action taken, such as service restriction) and demand that you proceed to the payment of (XXX) within (X business days).
Would you need a payment plan, we are happy to discuss it together.
If we don’t hear from you by the deadline above, we would regrettably have to take legal action and ask for compensation for our financial loss.
We look forward to hearing from you,
(Your contact info)
Formal notice letters 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 to keep your customer relationship positive.
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.