How to follow up on overdue invoices: Guide & payment reminder email templates

Almost every small business owner knows the frustration of a past-due invoice. 

In a recent survey, QuickBooks found that more than a quarter of small businesses say it takes more than 30 days to get paid, and more than half of small business owners say late customer payments are the source of their cash flow problems.

This guide will help you follow up on late payments, and includes payment reminder letter templates to help you write professional, friendly payment reminders.

What is an overdue invoice?

A past-due invoice is a payment a customer hasn’t made by the due date agreed in the invoice payment terms.

Late payments are a risk to your business — after all, you can’t pay your bills if your client doesn’t pay theirs. When you’re dealing with past-due payments, the important thing is to not panic and stay positive, even if you have to work a little harder to collect.

Here are some steps you can take if your client doesn’t pay an outstanding invoice on time.

How to follow up on past-due payments

1. Agree to a preferred invoice payment method up-front

For faster payments, hold the invoice conversation right at the start, before you do the work. If it’s too late for that, don’t beat yourself up. There’s always next time.

But it can be easier to get payment if you’ve determined these two specific logistics of what your client wants and needs in an invoice:

• Who should get the invoice: Sometimes it’s the client themselves, sometimes it’s the accounting department, or both. Make sure you know the procedure to expedite smoother, faster payment.

• How they like to pay: Offering your customers more payment options, such as credit card or bank transfer, ensures that there’s no holdup for an easily avoidable reason.

It’s an extremely common situation: a client becomes accustomed to paying for almost everything one way, only to become inconvenienced when that payment method isn’t available. If they pay for everything by credit card, and you’re asking for a check, they may not ever find the time to locate their cheque book, get a stamp, and put the check in the mail.

If your client hasn’t paid you on time, asking, “Would you prefer to pay another way?” may be all it takes to get paid on-time in the future.

2. Make it clear on the invoice what your customer is paying for

Clients are more likely to pay on time when the invoice makes what they’re paying for crystal clear. That’s why you want to make sure you’ve included all the information a client needs.

This could include:

• Consultation time

• Hours spent on specific tasks

• Research time

• Distinct project numbers for pre-defined deliverables

• Cost of materials

If you haven’t yet catalogued your products or services, it’s a worthwhile exercise that can make everything from marketing your business to sending invoices more efficient in the future.

You should also check that your payment terms and due date are featured in a prominent place on your invoice design. Without clear payment terms, it’s your word against theirs when an invoice is actually “late.”

You may be tempted to put “immediate payment,” but that can be confusing to some clients. Adding a date gives them a concrete target to meet. The most common payment term is “Net 30,” which means the recipient must pay their invoice within 30 days of the invoice date.

Be proactive and remind customers of their outstanding payments. Sending a reminder that their payment is due next week gives them a heads up, and may get the money you’re owed in your hands more quickly.

3. Establish a process for following up on past-due invoices

Having “the conversation” about past-due payments is a huge source of anxiety, especially when paying your own bills on time depends on the cash flow this late invoice represents.

However, like everything else we’ve discussed, having a system for following up on late payments can help you keep calm, and move on to your other work.

Accounting software does make following up on late payments easier, because, unlike manual systems like Word or Excel, you can sort invoices by client name or due date, and set up automatic invoice reminders for overdue payments.

How to write a payment reminder letter

When writing a past-due invoice letter, include the following details:

• The invoice number

• The date the invoice was issued

• The invoice due date

• The transaction payment terms

• The amount owed, including any late fees

• Instructions for payment

• Your phone number and contact information

This will help ensure your customer has all the information needed to pay the outstanding invoice.

To make it easier to send these polite reminders, QuickBooks allows you to create automated messages that you can send your clients. If you’re not automating reminders with QuickBooks, starting with a payment reminder template can help you write a professional and friendly payment reminder email.

Overdue invoice email templates

Day 1: The payment due date

If you haven’t received the payment by the due date, check to see if they even received the bill. Using QuickBooks allows you to see if your client has viewed the invoice, which can tip you off that they might have just overlooked the email.

Either way, send a polite email reminder mentioning that perhaps the invoice has gotten lost in the shuffle. That might be enough to jog them to remember to send it. Or, they may say “The cheque’s in the mail,” in which case you know the amount due is coming soon.

For your convenience, here are some overdue invoice reminder email templates you can use in your first email reminder to your customers or clients. Remember to customise your letter for unpaid invoices to your specific business, and match the tone of your relationship with them. These are meant to be guides to help you get started.

Overdue invoice reminder email template

Subject line: [Your Business Name]: Follow up on Invoice #XXXXX for [Product/Service]

Body:

Hi [Customer’s Name],

I hope all is well. This email is a friendly reminder that your payment on invoice #XXXXX, which was sent on [sent date], is due [due date].

We wanted to take this opportunity to see if you’ve had a chance to look over the invoice and confirm that everything is ok and on track for payment by [due date]. Attached is the invoice for your review.

Please let me know if you have any questions or concerns.

Thank you,

[Your Name]

[Your Company Name]

Invoice due email template

Subject line: [Your Business Name]: Invoice #XXXXX for [Product/Service] is due today

Body:

Hi [Customer’s Name],

I hope this email finds you well.

This email is to notify you that payment on invoice #XXXXX for the amount of [invoice amount], which was sent on [sent date], is due today.

We have not yet received payment on this invoice and ask that you kindly confirm an ETA for the payment. If payment is not received by [late fee penalty date], a late fee will be charged.

We hope to avoid any late payment charges, so if you have any questions about this invoice, please let us know and we will be happy to clarify.

Thank you,

[Your Name]

[Your Company Name]

Day 15: Two weeks late

When your payment is two weeks late, that’s when you may start feeling panicky.

If you haven’t received payment after your first reminder, that’s a good time to reach out with a polite phone call to reconfirm they have the overdue invoice reminder and see if they have any questions. Sometimes they neglect to tell you that there’s some specific information they need for their own system, like a PO number. Or it could be that your invoice has been overlooked because one of your customer’s employees is out of the office. There is almost always a good reason why your invoice hasn’t been paid, so don’t be shy about asking.

And here is a past-due invoice email template that you can simply copy, paste, edit and send to your customer:

Past-due invoice email template

Subject line: [Your Business Name]: Invoice #XXXXX for [Product/Service] is PAST-DUE

Body:

Hi [Customer’s Name],

I hope all is well on your end since our last correspondence.

Our records indicate that we have not yet received payment for invoice #XXXXX in the amount of [invoice amount], which was due on [due date].

The outstanding invoice amount is [invoice amount plus late fees, if applicable] and is [number of days] past-due. Attached is a copy of the invoice, in case the original was lost. For your convenience, you may make a payment here: [link to online payment or other payment methods].

If your payment has already been sent, please disregard this notice. If you have any questions or concerns, please contact me at [contact number].

Thank you,

[Your Name]

[Your Company Name]

Day 30: One month late

A payment this late may feel like it is bordering on rude, but that doesn’t mean you should be. Keep calm and stay professional in your follow-up.

If you have already spoken with the client, resend the invoice, along with any new charges, and reference the conversation you had and any concrete plans they had stated to send payment. In addition to email, send it via snail mail, which might get their attention.

You can also begin assessing late payment fees—but this is important—only if you had first explained it in your new client onboarding.

Hitting a customer with an unexpected late fee could cause more animosity than it’s worth. However, it’s perfectly fine to state your terms for late payments right up front and then be sure to itemise them on the next bill.

At this point, you may want to dial up your persistence. Be clear that you need to be paid and make sure you’re talking to the right person. If you are dealing with the accounting department, it might be time to get your client involved again as they have a vested interest in seeing you get paid in a timely fashion so the work can go on.

And that’s because this is an ideal time frame to cease current and future work. Politely let your client know via email that you will have to stop working on current projects until the bills are current.

Here is a 30-day past-due invoice email template that you can simply copy, paste, edit and send to your customer:

30-day past-due invoice email

Subject line: [Your Business Name]: Invoice #XXXXX for [Product/Service] is 30 days PAST-DUE

Body:

Hi [Customer’s Name],

This email is to remind you that your invoice is now 30 days past-due and I am seeking your immediate attention.

Our records show that we have not yet received payment for invoice #XXXXX in the amount of [invoice amount], which was due on [due date].

[Optional, if applicable] As your invoice is now past-due, a late fee of [amount] has been assessed.

The outstanding invoice amount is [invoice amount plus late fees, if applicable] and is [number of days] past-due. Attached is a copy of the invoice. You may make a payment here: [link to online payment or other payment methods].

Please let me know the status of your payment.

If your payment has already been sent, please disregard this notice. If you have any questions or concerns, or would like to discuss payment plan options, please contact me at [contact number].

I appreciate you addressing this at your earliest convenience so we can work out this matter.

Thank you,

[Your Name]

[Your Company Name]

Day 60: Two months late

If 60 days is considerably past your invoicing terms, you may want to consider:

• Using an invoice factoring agency

• Sending the bill to a collections agency

• Writing the invoice off as bad debt and moving on

Here is a 60-day past-due invoice email template that you can simply copy, paste, edit and send to your customer:

60-day past-due invoice email

Subject line: [Your Business Name]: Invoice #XXXXX for [Product/Service] is 60 days PAST-DUE – please send payment ASAP

Body:

Hi [Customer’s Name],

This important message requires your immediate attention. I have reached out to you on several occasions regarding a now 60-day overdue payment.

I have not yet received your payment on the attached invoice #XXXXX for the amount of [amount], which was due on [due date]. Please be aware that, as per my payment terms, you may be charged additional [late fees or interest] on payments received more than [number of days] past the due date.

If your payment is still not received by [final date], your account will be referred to a collections agency. This can be avoided by submitting your payment as soon as possible.

Again, if you have any questions or concerns about this payment, please contact me at [contact number]. I hope we can settle this matter as soon as possible.

Kind regards,

[Your Name]

[Your Company Name]

How to recover overdue money

There are a number of tried-and-tested methods to recover any money owed to your company, however, it is important to remember that the more extreme these methods become, the more likely you are to lose your customer.

You should always consider taking the lightest approach to recovering money first. In most cases, companies forget to pay the money they owe due to simple mistakes such as clerical errors, unexpected changes in their business, or simple forgetfulness, and should be treated with understanding in order to maintain a healthy working relationship.

In the following 8 steps, we explain the best way to recover money from an unpaid invoice.

1. Send a payment request

Send your client a politely worded payment request via email or by letter. For this type of letter you can simply offer a polite greeting with a reminder of why you require a payment, any relevant invoice or reference numbers, a due date for payment, and a request for when you can expect the payment to be made.

Make this step as simple as possible for your client by providing a payment link, bank details, or any information that will allow them to make the payment there-and-then if possible. At this point in an overdue invoice, it is very likely your client either forgot, or an issue has occurred that they were unaware of, and in most cases, your client will usually pay as soon as they receive this reminder.

2. Send an overdue invoice

An overdue invoice is simply the original invoice with the word ‘OVERDUE’ either stamped on the email, or more simply, with the word ‘OVERDUE’ written in the header of the email if you are sending your invoice electronically.

3. Send a statement of accounts

This is a summary of all outstanding invoices owed by a customer, and provides a good opportunity to collate all money owed into a single document. Again, your client may be unaware of how much they owe your company, or that they have multiple unpaid invoices, so a statement of accounts should be presented in a polite manner in case a clerical error has occurred on the part of the customer.

Use your accounting software to total any money owed by your client into one statement.

4. Make contact over the phone

If the above steps have failed, you should contact your customer by phone as soon as possible. This step can be difficult for both parties, but it is important to remember that your company is justified in making this step, and your customer should be expected to provide an explanation or intent to pay their overdue invoice at the earliest possible time. 

A phone call is something that can be handled by your accountant or payroll staff, who should ensure they maintain a firm yet polite tone of voice when conducting a call. Failure to make payments, particularly on services or goods that have already been rendered, can be detrimental to the working relationship and cash flow of both businesses, and a phone call is your last step before this process enters difficult terrain.

It is important that the person making this call has a) the authority to make decisions regarding the invoice, and b) either a good rapport with the client, or the expertise to deal with this matter on-the-spot.

It should be expected that, at this stage in the recovery process, your client may provide a number of reasons as to why they are yet to make a payment. These reasons may be genuine and will require compassion and understanding from the person making the call to make accommodations if necessary, but they should also have the insight to determine whether a reason for late payment is acceptable or not.

5. Charge a late payment fee

You should detail any late payment fees in your terms of payment at the beginning of your working relationship with a new client. This allows you to be up-front about fees that can be incurred should a client fail to pay on time, and allows you to give a client fair warning about what can happen should they avoid making payments by an agreed date.

Laying out your terms of late payment also gives you the opportunity to waive these fees as a gesture of goodwill, if this is the first instance of late payment, which will aid in strengthening your relationship with a client. Late-payment fees cannot be charged as an afterthought, meaning if these terms were not detailed in your original agreement, then your client cannot be expected to pay any additional fees they have not previously agreed to.

Late payment fees will usually increase over time, meaning the first instance of a late payment fee will often be the last, as your customer will want to avoid owing increasingly larger amounts of money.

6. Cut off services

At this stage in the payment recovery process you should expect that your working relationship with a client may be damaged, however, it is important to take a stance against a failure to pay after you have given a customer a number of chances to make a payment. If your client has no intention of paying an invoice, then your business cannot be expected to continue providing them with goods or services.

This step could lead to the client paying their invoice immediately to continue receiving goods, or it may lead to them turning to a competitor to provide them with what they need. It is not guaranteed that this step will damage your working relationship, afterall, business owners will likely understand that you yourself are running a business, and require the money they owe to continue your operations, however, this may not always be the case, and some companies may take offence to such a drastic action.

If this step appears too drastic to your company, you could also consider renegotiating your payment terms with the client for future dealings, for instance, increasing the price of your goods; increasing your late payment fees, or requiring future payments to be made up-front.

7. Arrange debt collectors

The final 2 steps in this process are your last resort, as they are likely to completely end your relationship with a client, as well as incur further costs to recover the money.

Debt collectors are very effective at recovering money you are owed, but will usually charge around 25% of the total recovered. Collection agencies also have their own steps to follow when recovering money, and will likely begin by making contact with the company first by email or telephone to make them aware the debt collectors are now responsible for recovering the money.

Failure to pay following initial contact may result in debt collectors arriving at the business to insist upon payment, or recovering goods to the value of the amount owed, however, these last steps are not guaranteed to be successful for a number of reasons outside of the collections agency’s control.

8. Hire solicitors

As a last resort in this process, you can hire a solicitor to begin legal proceedings to recover money you are owed. Some companies keep a solicitor on retainer, whereas others may need to seek one to resolve this issue, specifically a lawyer who specifically deals with trade and pay disputes.

This will again incur further costs to you, and it may be worthwhile considering if the amount you are owed, and your likelihood of recovering this amount, is worth the expense of hiring a collection agency or a solicitor. 

Takeaways: Friendly reminders can help you get paid

No business owner wants to deal with unpaid invoices, but it’s likely that most will encounter late payments at some point. By proactively setting up systems and processes that provide clarity around your accounts receivable and keep you protected, you’ll be able to focus more on doing the work and growing your business, and less on the administrative headache of getting paid.

Of course, the timeline outlined in this guide represents the worst-case scenario; in most situations, all you’ll need to do is send a simple follow-up reminder email, maybe provide more payment options, and your payment will be on its way.

QuickBooks provides easy to use invoicing software for accountants, sole traders, and limited companies. Simplify your invoicing process today and help your business avoid chasing customers with unpaid invoice reminders.

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