How to Word Your Past Due Letter
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How to Word Your Past Due Letter

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Late payments are a common occurrence for small businesses, but through consistent Receivables Management, you can whip all your customers into reliable, on-time payers. Besides being organized, how you word your past due letter is the most important step towards being successful. As experts in collecting payments and Receivables Management, here are our top tips!

 

ProActive Reminder

Approximately 15-7 days before the payment is due, send your customer a friendly and polite reminder. Approach this email or letter as a “courtesy call”.

Begin with “For your convenience” to signify that this is not a nagging email, merely a helpful gesture. We all know how busy small business life can be!
Keep the email personal and friendly, and include a link to the invoice and payment options.

Example Language:

Dear Jan,
For your convenience, I wanted to send you a quick reminder that payment for Invoice 453 is about to be due (date).
You can pay via our website (link) or PayPal (link).
I hope you have a wonderful rest of the week, and look forward to doing business with you again soon!
All the best,
Michael

First Past Due Letter

The very first day a payment is past due, send your first collection email. It’s important to let the customer know you are aware of their delinquency, and overall quite on top of your Accounts Receivable. Over time, this immediate action policy will train your customers to prioritize your invoices. Most past due payments are simply due to disorganization or preference for longer payment terms- not malice. As such, your first past due letter should be firm, but still cordial. Use more formal language to signify your serious intention, and to prevent the late payment as becoming a personal issue. To avoid defensiveness or tension, broach the issue delicately by saying “your account with us now appears as past due”. Be sure to include the invoice you’re referencing, the date it was due, and a short reminder about your payment policy. “As you know, our payment terms are 30 days from the date of the invoice”. The first past due letter is the perfect time to bring up any late fees your company may assess to the total. Always include payment options in your past due letters so they can be acted on as quickly as possible. Follow up this payment reminder with a call. If possible, record the conversation for accurate record keeping. If no response comes from the first email, re-send it at the 45-50 day mark.

Example Language:

Dear Jan,
This is a friendly payment reminder, as your account with us now appears as past due.
We’d like to bring the following invoice(s) to your immediate attention:
Invoice #    Date Due    Amount
Payment options:    our website (link) or PayPal (link)
We would much appreciate if you could let us know the status of this payment. Please do not hesitate to call us if you have any questions about the balance due on your account.
As you know, our payment terms are 30 days from the issue date of the invoice and a late fee of 5% is assessed to your account if payment is not received within 40 days of the issue date.
Thank you very much for your attention to this matter and your continued business.
Sincerely,
Michael

60 Days Past Due Letter

When an invoice is between 60-90 days past due, the likelihood of successful collection can dramatically drop. It’s very important to send a strong series of emails and diligently follow up with calls during this time period. An invoice that is 60+ days past due is less likely to be due to simple disorganization, it is more likely that there is an underlying problem. It’s important for this past due letter to be firm, include bolded words, and formal language. Include additional employees of the company on the email, including the highest ranking administrator you can find an email for. Also consider sending individual emails to other members of the department.

Your subject line can begin with “IMPORTANT” or “Requires Immediate Attention” or “Action Needed”.
Instead of taking the “alert” approach, be direct: “we are writing to inform you that your account is now 60 days past due”. Include phrases like “immediate attention” or “urgent matter”.
Let them know you will be calling and continuing the follow-up process. It’s helpful to remind them that you’re a business too, so include language such as “our quarterly financial needs require all accounts to be paid in full”.  Remind the customer that due to business policy, you will be unable to conduct continued business with a customer who is currently past due, or has two incidences of being 60+ days past due.
Given the reduced likelihood of successful collection after 90 days, follow up emails to your 60 days past due letter should include offers to work out a payment plan or to help them find credit options through Fundera or Kabbage.

Example Language

IMPORTANT NOTICE
Dear Jan,
This is to inform you that your account is now 60 days PAST DUE for invoice #345.
This matter requires your immediate attention. Please remit payment as soon as possible.
Invoice #    Date Due    Amount     + 5% Late fee, assessed date
Payment options:    our website (link) or PayPal (link)
Please inform us as to the current status of this payment. If you have any questions about this invoice or the balance due on your account, please call us immediately.
We will continue to reach you to resolve this matter.
As stated in the contract, payment terms are net 30. Please note that as per our business policy, we are unable to do continued business with a client who is currently past due, or who has been 60+ days past due more than once.
Sincerely,
Michael

90 Days Past Due Letter

Invoices that are between 90 and 120 days past due are significantly more difficult to collect on. Your payment reminders for invoices in this category should be quite firm, formal, and utilize tactics to get their attention like bolded text or enlarged fonts. State the consequences of their actions and your numerous attempts to get in touch. Include additional employees of the company on the email, including the highest ranking administrator you can find an email for.

Example Language:

REQUIRES IMMEDIATE ACTION
Dear Jan,
This is an important letter and requires your immediate attention. Despite sending you several reminders, we have received no response from you about your seriously past due account. We feel we have given you ample time and have been more than patient with you. Therefore, we feel there is no other 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-C filing. You can avoid this by remitting payment today for the full amount due. If we do not receive your payment within the next five days, we are going to have to take action.
Please reach out to us immediately if you would like to set up a repayment plan.
The following invoice(s) require your immediate attention:
Invoice #    Date Due    Amount     + 5% Late fee, assessed date
Payment options:    our website (link) or PayPal (link)
As stated in the contract, payment terms are net 30. Please note that as per our business policy, we are unable to do continued business with a client who is currently past due, or who has been 60+ days past due more than once.  We sincerely hope you will give this matter serious consideration.
Sincerely,
Michael

 

Final Past Due Letter

For invoices over 120 days past due, there is still some chance of collection and therefor sending additional communication is still worthwhile. Include the consequences of their actions (bad debt write-offs, credit score) as well as language letting them know you will be taking the appropriate actions to report their severe delinquency: collections agency and the BBB.

Use bold language like “severe” and “delinquent”. Continue including additional employees of the company on the emails.

Example Language:

NOTICE: YOUR ACCOUNT IS SEVERELY DELINQUENT
Dear Jan,
This is an important letter and requires your immediate attention. Despite sending you several reminders, we have received no response from you about your seriously past due account. We feel we have given you ample time and have been more than patient with you. Therefore:
  • We feel there is no recourse but to put your account in the hands of our collection agency.
  • This action will affect your company’s credit rating.
  • We may also report this to the I.R.S. as “bad debt loss” with form 1099-C if payment is not received.
Please reach out to us immediately if you would like to set up a repayment plan.
The follow invoice(s) is severely past due:
Invoice #    Date Due    Amount + 5% Late fee, assessed date
Payment options:    our website (link) or PayPal (link)
As stated in the contract, payment terms are net 30. Please note that as per our business policy, we are unable to do continued business with a client who is currently past due, or who has been 60+ days past due more than once.  We sincerely hope you will give this matter serious consideration.
Sincerely,
Michael

 

You can download collection letters from our free tools section, or send out one of our many pre-loaded collection emails from our app (the FG Receivables Manager).
It tracks the emails you send in a customer contact history and records any phone calls.
You’ll be able to see if the customer open or clicked your email. Emails in the FG Receivables Manager also have detailed invoice views and the ability to receive payments.

 

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