Almost every small business owner knows the frustration of a past due invoice. Late customer payments can be the number one culprit behind a small business’s stagnant cash flow. When invoices are paid late (or not at all), cash flow suffers — impacting your ability to pay your bills, vendors, and employees on time.
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 a past-due 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, eCheck, or direct ACH 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 checkbook, 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 cataloged 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.
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 overdue invoice.
Past due 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 just have 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 check’s in the mail,” in which case you know the amount due is coming soon.
For your convenience, here are some invoice reminder email templates you can use in your first email reminder to your customers or clients. Remember to customize them to your specific business, and match the tone of your relationship with them. These are meant to be guides to help you get started.
Payment 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 a late fee penalty, 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 invoice and see if they have any questions. Sometimes they neglected 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:
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 itemize 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 agencya
- 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]
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.
This article originally appeared on the Quickbooks Resource Center and was syndicated by MediaFeed.org.
More from MediaFeed:
18 business ideas for freelancers
Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money. The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Whether you’ve come to embrace WFH culture, need to supplement your income or have joined the Great Resignation and are now looking for more fulfilling work, starting a freelance business can be a great solution.
Freelancing often comes with a number of perks, like getting to be your own boss, setting your own hours, and working from wherever you like. Start-up costs are often low. And, if you need some capital to get your business going, you may qualify for a small business loan for self-employed people.
However, starting your own freelance business can take a lot of hard work and hustle, and it may be some time before you start making real money. If you’re up for the challenge, here are some home-based small business ideas to help you brainstorm the best way to tap into your talents and flex your entrepreneurial muscles.
Related: How to run a successful small business: 9 helpful tips
Depositphotos
If you have a great eye and a decent camera, you may be able to turn your creativity into cash. One option is to sell your photos to a stock imagery site like Getty Images or Shutterstock. If your home is particularly picturesque, you might offer to do headshots or portraits in your yard or set up a home studio. If you’re interested in event photography, you can market your services to people who need professional photography for weddings, graduations, engagements or other events.
DepositPhotos.com
If you are both creative and technical, you might enjoy freelance web design. A web designer typically builds all the elements of a website, including the graphics, type fonts and layout. You’ll likely need to have some knowledge of basic programming languages, such as HTML, CSS and JavaScript, and also know your way around image editing software like Photoshop. You can learn these programs through research and practice or classes. When you’re ready, you can create your own website to showcase your skills and market yourself to potential clients.
DepositPhotos.com
Virtually every business needs creative elements like logos, web designing, memes, blog posts, infographics, ad banners and more. That means there is often a lot of opportunity for a good graphic designer to get freelance work. To become a graphic designer, you typically need to have strong drawing skills, knowledge of graphic design theory, and mastery of design software (such as Photoshop and Illustrator). You can take a degree course in designing or learn it online. Once you have some solid skills, you can start marketing your design services to potential clients.
mangpor_2004 / iStock
If you have an eye for color and composition and love to create beautiful, inviting spaces, you may want to think about getting gig work as an interior designer. You don’t necessarily need to have a degree in design to become an interior design consultant. You can just create a portfolio of some of the successful redesigns you’ve done and ask your friends and family to start recommending you.
FollowTheFlow / istockphoto
If you have video editing skills and are looking to freelance, you may find yourself in demand. With the growing prevalence of video in social media and marketing, the need for video producers has grown in recent years. Even if you don’t have a lot of experience cutting and editing video, you can hone your video skills with online classes and tutorials. As a video producer, you can have the flexibility of working from home on a variety of projects while also utilizing your creativity.
BartekSzewczyk / istockphoto
Does your skill set include online advertising, content writing and SEO? If so, you may want to consider starting a digital marketing services business. When companies roll out new products, they often need help handling external communication and messaging, including email campaigns, online advertising, and social media marketing. And since it’s digital marketing, you aren’t likely to be rooted in any one location.
GaudiLab/istockphoto
If you understand how engaging multimedia content can be used in marketing, then social media consulting may be a good fit for you. As a social media manager, you can help companies understand how to use Facebook, Twitter, Instagram and other platforms to reach their business goals. If you can stay on brand, share content appropriately, and reply to customers intelligently, you might make a great social media manager.
DepositPhotos.com
Companies of all types and sizes are using data analytics to understand trends in customer behavior. Data analysts use a variety of analytical tools to assess things like sales numbers and performance, identify market trends, and then write reports that chart their analysis and recommend future strategies. This can be a great freelance option for people who have been working in data analytics. However, beginners can take online courses and enroll in certification programs to master the required skills.
Lukas / Pexels
To stay competitive, email marketing is a must for many companies. And that can be great news if you are a strong and creative writer. Having a background in sales and marketing can also serve you well. Email marketing pros need to be able to craft creative and compelling copy about a company’s products, services and promotions, and convert readers into buyers. The job may also include monitoring email marketing campaigns, building email databases and tracking results.
fizkes / iStock
SEO service providers utilize search engine optimization to make sure a company’s site comes up high in online search results since a high-ranking placement generally translates into a lot of site traffic. If you’re an SEO pro who understands Google’s algorithms and the value of keyword frequency and meta descriptions — or you’re willing to learn — you may find your services in demand by a range of different organizations who need help with their SEO content strategy.
fizkes/istockphoto
Blogging can be a profitable freelance job. If you are able to build a large following, you may be able to sell advertising space, which can bring in a small revenue stream. You can earn even more through sponsorships and affiliate marketing, which is when brands you believe in pay you for advocating their goods and services. If you don’t want the limelight yourself, you may be able to blog behind the scenes for companies and individuals (like high-profile folks who need a blog but don’t have the time to feed the beast) who may pay you handsomely by the hour or post.
pondsaksit / iStock
Copywriters typically create material that encourages consumers to buy goods or services. Copy can be used for advertising, websites, billboards, email campaigns, newsletters and more. As a freelance copywriter, you may find yourself creating catchy taglines for online or print advertisements or composing a unique blog article optimized for the web. Freelance copywriters can work directly with clients or through intermediaries such as agencies or online work exchanges.
FlamingoImages / istockphoto
If you’re an ace at organization and love throwing parties for your friends, event planning could be a good fit for your freelance business. An event planner ensures that events, such as parties, weddings, fund-raisers, meetings, and conventions, are planned, organized and executed correctly. The job typically includes scouting out locations, securing any services needed at the event (such as food, transportation, and entertainment), and being on-site the day of the event to make sure everything runs smoothly and everyone has a great time.
marcha212003 / istockphoto
Maybe math is second nature to you, or your grades on essays were always A+. Or perhaps you are a gifted piano player. Whatever your particular talent, there is a good chance that there are folks out there who need some assistance in that area. You can start advertising your tutoring or teaching services through friends, family and neighbors and build out from there.
Deposit Photos
If you’re an animal lover, pet-sitting allows you to enjoy pets without the responsibility of ownership. All you typically need to get started is an understanding of how to properly care for dogs and cats (or any other pets that may need your services). For many, this freelance job can be a win-win: You get to build relationships with the animals and get paid for showing some TLC.
DepositPhotos.com
Do you have a talent for crafting or creating handmade goods? It could be quilts, decorative pillows, hand-knit sweaters, jewelry, you name it. If so, you may be able to turn your hobby into a freelance business by advertising your goods on a craft-selling site like Etsy, Handmade at Amazon or ArtFire. In addition to selling online, you may also want to take advantage of opportunities to sell at street fairs, bazaars and festivals.
Rawpixel/istockphoto
If you’re a fast and accurate typist, you may want to consider becoming a freelance transcriber. This kind of work involves listening to an audio recording, such as a webinar, video conference, interview, or speech, and then typing every word that is spoken into a document. There are all kinds of companies that hire freelance transcribers, as well as transcription services that hire individuals to transcribe audio for various clients.
fizkes / istockphoto
Once you have your cosmetology license, you typically have a lot of flexibility in terms of when and where you work. Who says you have to be in a salon all day? Many hairstylists and makeup artists work for themselves and offer mobile services, in which they serve clients right in the client’s home. Or you might offer services in your own home. You can also start a hair or makeup blog or post tutorials on YouTube to generate an additional revenue stream.
dragana991/istockphoto
When it comes to starting a freelance business, having a good idea is only the beginning. A great next step is to develop a business plan. This involves deciding your company’s purpose, figuring out what service or products you will offer, and setting measurable targets and goals.
In addition, you may want to determine business financing options if you need initial capital to get started and then create a business budget.
It’s also a good idea to choose a business structure (such as a sole proprietorship or limited liability company), get any required licenses or permits, and purchase any equipment and supplies you may need, being sure to keep receipts since these expenses may qualify as self-employed tax deductions.
DepositPhotos.com
There’s much appeal to the freelance life. You get to call the shots and work as much or as little as you like. And turning your marketable skills into your own home-based freelance business may be easier than you think.
One of the biggest challenges you may face is how to fund your business. You may have savings to get you going or have family and friends who will help you launch. If not, you can look into getting a small business loan.
Learn more:
This article originally appeared on LanternCredit.com and was syndicated by MediaFeed.org.
Lantern by SoFi:
This Lantern website is owned by SoFi Lending Corp., a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license number 6054612; NMLS number 1121636. (www.nmlsconsumeraccess.org)
All rates, fees, and terms are presented without guarantee and are subject to change pursuant to each provider’s discretion. There is no guarantee you will be approved or qualify for the advertised rates, fees, or terms presented. The actual terms you may receive depends on the things like benefits requested, your credit score, usage, history and other factors.
*Check your rate: To check the rates and terms you qualify for, Lantern conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender(s) you choose will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
All loan terms, including interest rate, and Annual Percentage Rate (APR), and monthly payments shown on this website are from lenders and are estimates based upon the limited information you provided and are for information purposes only. Estimated APR includes all applicable fees as required under the Truth in Lending Act. The actual loan terms you receive, including APR, will depend on the lender you select, their underwriting criteria, and your personal financial factors. The loan terms and rates presented are provided by the lenders and not by SoFi Lending Corp. or Lantern. Please review each lender’s Terms and Conditions for additional details.
Personal Loan:
SoFi Lending Corp. (“SoFi”) operates this Personal Loan product in cooperation with Even Financial Corp. (“Even”). If you submit a loan inquiry, SoFi will deliver your information to Even, and Even will deliver to its network of lenders/partners to review to determine if you are eligible for pre-qualified or pre-approved offers. The lenders/partners receiving your information will also obtain your credit information from a credit reporting agency. If you meet one or more lender’s and/or partner’s conditions for eligibility, pre-qualified and pre-approved offers from one or more lenders/partners will be presented to you here on the Lantern website. More information about Even, the process, and its lenders/partners is described on the loan inquiry form you will reach by visiting our Personal Loans page as well as our Student Loan Refinance page. Click to learn more about Even’s Licenses and Disclosures, Terms of Service, and Privacy Policy.
Student Loan Refinance:
SoFi Lending Corp. (“SoFi”) operates this Student Loan Refinance product in cooperation with Even Financial Corp. (“Even”). If you submit a loan inquiry, SoFi will deliver your information to Even, and Even will deliver to its network of lenders/partners to review to determine if you are eligible for pre-qualified or pre-approved offers. The lender’s receiving your information will also obtain your credit information from a credit reporting agency. If you meet one or more lender’s and/or partner’s conditions for eligibility, pre-qualified and pre-approved offers from one or more lenders/partners will be presented to you here on the Lantern website. More information about Even, the process, and its lenders/partners is described on the loan inquiry form you will reach by visiting our Personal Loans page as well as our Student Loan Refinance page. Click to learn more about Even’s Licenses and Disclosures, Terms of Service, and Privacy Policy.
Student loan refinance loans offered through Lantern are private loans and do not have the debt forgiveness or repayment options that the federal loan program offers, or that may become available, including Income Based Repayment or Income Contingent Repayment or Pay as you Earn (PAYE).
Notice: Recent legislative changes have suspended all federal student loan payments and waived interest charges on federally held loans until 05/01/22. Please carefully consider these changes before refinancing federally held loans, as in doing so you will no longer qualify for these changes or other future benefits applicable to federally held loans.
Auto Loan Refinance:
Automobile refinancing loan information presented on this Lantern website is from Caribou. Auto loan refinance information presented on this Lantern site is indicative and subject to you fulfilling the lender’s requirements, including: you must meet the lender’s credit standards, the loan amount must be at least $10,000, and the vehicle is no more than 10 years old with odometer reading of no more than 125,000 miles. Loan rates and terms as presented on this Lantern site are subject to change when you reach the lender and may depend on your creditworthiness. Additional terms and conditions may apply and all terms may vary by your state of residence.
Secured Lending Disclosure:
Terms, conditions, state restrictions, and minimum loan amounts apply. Before you apply for a secured loan, we encourage you to carefully consider whether this loan type is the right choice for you. If you can’t make your payments on a secured personal loan, you could end up losing the assets you provided for collateral. Not all applicants will qualify for larger loan amounts or most favorable loan terms. Loan approval and actual loan terms depend on the ability to meet underwriting requirements (including, but not limited to, a responsible credit history, sufficient income after monthly expenses, and availability of collateral) that will vary by lender.
Life Insurance:
Information about insurance is provided on Lantern by SoFi Life Insurance Agency, LLC. Click here to view our licenses.
DepositPhotos.com
Depositphotos
Featured Image Credit: DepositPhotos.com.
