4 Steps to Create a "Firm" Letter for Your Late-Paying Customers
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4 Steps to Create a “Firm” Letter for Your Late-Paying Customers

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As a business owner, there will come a time when you need to be harsh with a client about a late payment. The best plan of action is to have a template all ready for yourself that you can use in most situations. This takes the emotion out of it (you are probably upset at the late payment) and allows you to move forward with your business with as little drama as possible.

Once a client hasn’t paid for several months, you need to consider writing off the debt as a loss. But before you do that, take a few final steps to try to get the payment in your door. Here is the formula to create your harsh payment demand letter.

1. Modify The Language

Initially, you were friendly. After the invoice due date, you were firm. Now, it’s time to be clear and demanding.

Begin the letter by stating the obvious. “This is an important letter about a matter that requires your immediate attention,” or something to that effect, gets the point across immediately and effectively. You are not going to keep gently asking for payment; now you are demanding it.

There is no more “Your account appears to be past due,” or even, “Your account is past due.” Now you need to say, “We have received no response from you about your seriously past due account.

2. Explain What Will Happen

If you don’t receive payment from the client, you will need to write the debt off as “bad-debt loss” with a 1099-A form.

Explain this to your client clearly so they understand the repercussions of continued non-payment: “We feel there is no recourse but to write this debt off of our books by reporting it as a ‘bad-debt loss’ to the I.R.S. through a 1099-A filing.”

Again, this reiterates to the client that you are not simply going to keep asking them. You take your business seriously, and if you don’t receive the payment, you are going to take action.

3. Give Them Recourse

The purpose of this letter is not to shame your client; it’s to get prompt payment in your account.

Be sure to give the client a way to remedy the situation immediately: “To avoid this course of action, send us a check today for the full amount due.”

By giving your client the opportunity to solve the problem, you might save yourself having to go farther along in the debt collection process. Imagine a credit card company giving you a last chance to pay up – you would most likely do everything you could to fix the situation and avoid harming your credit.

Add a sentence that provides a concrete timeline of events, “If we do not receive your payment within the next five days, we are going to have to take action” to avoid the “check is in the mail” excuse.

4. Don’t Pull Your Punches

Fight the urge to start sentences with, “I’m sorry, but…” or “I would really appreciate if…” This situation is not your fault, and wording like this makes it sound like you are taking on the blame.

Your client needs to know that you are serious about getting paid, and words like this will make any reference to taking further action sound like an empty threat.

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