Business Loans

How to Send a Payment Reminder Email to a Client

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

You’ve completed the work for a customer, sent off the invoice and are now simply awaiting payment. Chasing late payments is nobody’s idea of a good time, but as a business owner, sending payment reminders is a reality of running a company that extends credit to its customers.

Even the most diligent business owner can’t avoid dealing with late payments entirely, but there are some steps you can take to collect on those late invoices — or even better, cut down on late payments in the first place.

Payment reminders: Be proactive
5 payment reminder emails
What to do if you still haven’t gotten a response

Payment reminders: Be proactive

Prevent late payments in the first place: As the saying goes, the best offense is a good defense, and the best way to head off late payments is to have a good credit policy in place. As a business owner, you’ll want to make sure your policy isn’t so lenient that it leads to constant late payments, but not so strict that you lose business to competitors. Here are some tips for setting up your credit policy:

Check out the competition.

Just as you look to your competition to compare services and prices, find out how they handle extending credit to their customers. If a competitor company has better credit terms, it might be attracting more customers. Don’t go overboard trying to outdo a competitor’s terms — instead, try to at least match them if it makes sense.

Don’t extend credit past your profit margins.

Offer only what you can afford to lose within your profit margins — you want to make sure that you’ve at least covered your expenses. Requesting a down payment is also a good idea.

“If you collect part of the money on the front end, even if it’s minuscule, you’re much more likely to be paid in a timely manner,” said Roger Weiss, a credit and collection expert based in St. Louis.

Investigate before you offer credit.

Do some homework on your customer upfront to avoid headaches later. You should have a detailed credit application that includes your credit policy, including consequences for late payment (such as interest charges and fees).

Your credit application should request the following from your customer:

  • Name of business, address, phone and fax number
  • Names, addresses and Social Security numbers of principals
  • Type of business (corporation, partnership, sole proprietorship)
  • Industry
  • Number of employees
  • Bank references
  • Trade payment references
  • Business/personal bankruptcy history
  • Any other names under which the company does business
  • A personal guaranty from the business owner to pay you if their company cannot

Consider pulling a business credit report as well, especially if you anticipate extending a large amount of credit. Three primary agencies supply business credit scores — Experian, Equifax and Dun & Bradstreet — and you can request a full business credit report from each of those bureaus for a fee.

Hire an attorney.

You should also work with a business attorney who is familiar with collection practices and can review all your credit-related paperwork on an annual basis, according to Weiss.

Your paperwork should clearly state your policies, including what happens if people pay late. You can also spell out those terms in your contract or engagement letter. That’s especially important if you’re going to charge late payment fees or recoup attorney fees from a client if a situation escalates, said Helena Swyter, a Chicago-based accountant.

Include details in your invoices.

Your invoice should clearly detail the services or products you provided and the repayment terms, including:

  • Description of the work that was performed, including hours worked, items ordered, etc.
  • Total amount due
  • Date the money is due
  • Payment terms — including discounts if the customer pays the bill early — and information regarding whether interest fees will apply to late payments
  • Methods of accepted payment
  • Contact information, in case the customer has questions about their bill

5 payment reminder emails

Asking for a late payment is awkward, but don’t feel bad about it. The best practice is to be polite, firm, professional and consistent in your communications. Having a plan in place to deal with late payments will take some of the stress out of the situation.

Send the first copy of an invoice through the U.S. Postal Service and email, Weiss recommended. And don’t assume your customer received your invoice — nowadays, many people don’t check their email spam folders, and your invoice could have ended up there. Follow up on emails, make a phone call or two — and possibly send a text message. The key is to know your customer: Some people may find a text message invasive, while others consider it perfectly acceptable — or even preferable.

Here are five payment email templates you can use to ask for late payments. Make sure you attach a copy of the invoice to the email so your customer doesn’t have to search for it.

1. Initial invoice reminder

You don’t have to wait until a payment is late to reach out to your customer. One good way to avoid late payments is to send a short, friendly email about the invoice seven days before it’s due. This is a good way to jog customers’ memories, ensure they received invoices and give them a chance to ask any questions that might delay payment.

Dear John Smith:

Thank you again for your business. This is a reminder that payment for invoice #12304 will be due next week on Friday, Oct. 10.

Please take a moment to look over the invoice when you have a chance and let us know if you have any questions. You can also reach me at 555-499-0048. We hope you’re enjoying your new custom blinds!

Thank you!

Jane Q. Public

2. Day-of email reminder

You should send your second email on the payment due date and remain brief — and friendly in tone — because technically the payment isn’t late. This time, you can include a little bit more information, such as the invoice amount.

Dear John Smith:

This is a just a reminder that your invoice #12304 for $7,000 is due today. You can make the payment to the bank account listed on the attached invoice.

Feel free to contact me with any questions. You can also reach me by phone at 555-499-0048. We appreciate your business.

Thank you!

Jane Q. Public

3. Email payment reminder after payment is one week late

When payment is a week overdue, send another email — and call the customer. The call is to make sure that the customer has actually received the previous emails or letters and that they plan to pay the invoice.

Dear John Smith:

Our records show that we haven’t yet received payment of $7,000 for invoice #12304, which was due Oct. 10. I’ve attached the invoice to this email in case you misplaced it. If you can check your records to see if you’ve remitted payment, I would appreciate it.

Feel free to contact me with any questions. You can also reach me by phone at 555-499-0048.

Thank you,

Jane Q. Public

4. Email reminder after payment is two weeks late

When you send this email, reiterate the invoice number, outstanding payment amount and any contact information, and list any attempts to previously contact the customer for payment. Consider calling the customer again or sending a text message.

At this point, you can’t automatically assume the customer is purposely dodging your efforts to collect on payment, but you can take a firmer tone.

Dear John Smith:

I left you a voicemail message and have sent you multiple emails to remind you to pay invoice #12304 for $7,000, which was due two weeks ago.

I’ve attached a copy of the original invoice. Please let me know if you have questions about payment. Can you also let me know that you’ve received this email?

Thank you,

Jane Q. Public

5. Email reminder after payment is one month late

At the 30-day overdue point, it’s a good idea to mention the consequences of late payment in your email. You should still be polite, but much more direct about asking for payment.

Dear John Smith:

This is another reminder that we have not yet received payment for invoice #12304 for $7,000 — your payment is 30 days late. Per our credit terms, we can charge you additional interest on any payment received more than 30 days late. I have attached a copy of the invoice for your convenience.

Feel free to contact me if you have any questions. If not, please send payment immediately.

Thank you,

Jane Q. Public

What to do if you still haven’t gotten a response

If you don’t receive payment after several emails and one or two phone calls, you’ll have to decide how to escalate the situation. Part of that will depend on your relationship with the customer. If you have a history with them and they’re habitually late but always eventually pay, you might want to give them some leeway — though you might also consider whether it’s worth the hassle of keeping a customer like that.

If the customer almost always pays on time, you might want to modify your approach. Is it possible they didn’t get the invoice or have hired someone else to handle payments? Have they had some kind of emergency?

Weiss, however, cautioned to keep your credit policies as consistent as possible: “The biggest thing creditors can do to help themselves is define what they’re going to do and stick to it. Don’t hesitate, it will cause you anguish.”

Less than 90 days late

Between 30 and 90 days you can try softer — but still direct — approaches. One possibility is sending a demand letter from an attorney via certified mail, Swyter suggested. At about the 60-day mark, you might consider working with a professional credit and collections agency in precollections, Weiss said. That will come at a cost, but could yield better results.

Sending a payment to collections should be a last resort, and Weiss never recommends doing it before it’s 90 days late. Prior to that, you should use methods that don’t involve reporting the outstanding payment to credit bureaus.

More than 90 days late

At the 90-day mark, it’s time to turn things over to bad debt, Weiss said. Run the numbers first, however — depending on the invoice amount, it might not be worth the time, trouble and expense of using a collections agency.

Unfortunately, most small businesses can’t write off unpaid invoices. That’s because they often use the cash method of accounting, which means, for tax purposes, that you would only report income and expenses when money changes hands, Swyter said.

“Since you never received the income from the unpaid invoice, there’s nothing to write off,” she said. You can, however, deduct expenses you incurred related to the work or trying to collect on the invoice. For example, if you bought fabric swatches to show the client or took a taxi to meet the client, you can write off those expenses.

 

Compare Business Loan Offers