Late payments and overdue invoices are a serious issue for many UK businesses, with SMEs particularly vulnerable to this disreputable business practice. Unpaid bills can affect cash flow, which can pose a serious threat to your company’s ability to carry on trading. As a result, chasing overdue invoices and knowing how to write an effective overdue invoice letter or email are important skills for small businesses. Find out everything you need to know about unpaid invoice emails and take a look at our overdue invoice letter template.
Preventing overdue invoices
Chasing overdue invoices isn’t a particularly enjoyable task, and it means that your accounting team have to spend more of their time on accounts receivable and less on value-added tasks. As such, it’s a good idea to spend your time preventing invoices from becoming overdue, rather than chasing them up once the payment date expires. Here’s a few ways that you can avoid late payments:
Run credit checks on your customers – Doing business with the “right” sort of customer can have a big effect on whether you receive payments on time. Research potential customers to ensure that you’re doing business with a well-run, reputable company.
Implement clear payment terms – Setting clear payment terms that leave your clients in no doubt as to when payment is due is a vital part of preventing overdue invoices. Otherwise, they may not even be aware that their payment is late.
Include late payment penalties in your invoice terms – One way to potentially deter clients from paying late is to include fees, or interest, in your payment terms.
Automate payments – Automating payments altogether is another way of entirely avoiding the issue of chasing up overdue invoices. Direct Debit payment solutions like GoCardless can handle the whole payment collection process for you.
First steps for retrieving an overdue invoice
When you’re dealing with an overdue invoice, getting in touch with the customer should be your first step. In many cases, it’s the only step you’ll need to take. Many customers simply forget about invoices or find themselves dealing with a backlog that slows down the speed at which you can expect to be paid. A friendly phone call, letter, or email should get the ball rolling. However, it’s not always that simple. Many businesses worry about saying the wrong thing and damaging an otherwise strong relationship with a customer. So, what’s the right wording for overdue invoice letters?
Tips for writing an overdue invoice letter/email
Keep it light – When it comes to getting your overdue invoice wording right, it pays to start with a light touch. By keeping the conversation friendly and requesting payment in a respectful manner, you can give your client the chance to save face and keep the relationship intact.
Unless they push it – However, some clients are simply hoping you’ll decide the invoice isn’t worth your time and forget about it. That’s why it’s important to tailor your language. If they’re only a couple of days late, it’s a good idea to keep things light. However, if they’re 90+ days late, your overdue invoice wording should be firm and demonstrate the urgency of your request.
Attach the invoice to the body of the email – Ensure that you attach the original PDF file to the email, rather than simply pasting the invoice into the body of the email. That way, the client can easily upload the unpaid invoice to their accounting software or save/print a copy as necessary.
Make it easy for your client – Ultimately, the easier it is to make payment, the more likely you are to actually get paid. Ensure that the subject line of your unpaid invoice email includes everything that they need to know, including the original due date and the invoice number, so that they don’t need to go rooting around their inbox for the pertinent information.
Cut down on admin by using an invoice template – If you send lots of invoices, you may find yourself also sending lots of unpaid invoice emails. That can eat into your productive hours and stop your accounting team from focusing on more important tasks. Producing and using an overdue invoice letter template can help streamline the way you chase overdue invoices.
Overdue invoice letter template
Looking for an overdue invoice letter template? We’ve got you covered. Generally speaking, it’s best to send an overdue invoice email, rather than a letter, purely because emails are faster and you’re more likely to receive a reply. Here’s a simple overdue invoice letter template that you can use to chase up a payment that’s 1-15 days late:
Subject line: Overdue invoice [Invoice Number Here] for [Product/Service Here] due [Due Date Here]
I hope this email finds you well! This is a friendly reminder that we haven’t received payment for invoice [Invoice Number Here] for [Product/Service Here], which was due on [Due Date Here]. Just in case the invoice wasn’t received, please find it attached. As discussed previously, our invoice terms are [X] days from date of issue. Let us know when we can expect payment, and feel free to reach out if you have any questions.
But what happens if you’re dealing with a more serious situation and the invoice still hasn’t been paid after 90 days? Here’s another overdue invoice letter template with slightly stronger language:
Subject line: Overdue invoice [Invoice Number Here] for [Product/Service Here] due [Due Date Here] – URGENT
We require your urgent attention to resolve this issue. We contacted you on [Date] regarding your overdue invoice and still have not received payment. Please ensure that the invoice is paid within 10 business days, or we will refer your account to a collection agency. As discussed previously, our invoice terms are [X] days from date of issue and late fees are [X] percent per month. As your payment is 90 days late, a [X] percent late fee has been added. Please let us know when you intend to send payment.
Next steps for settling your overdue invoices
If, after sending an overdue invoice letter, they still haven’t paid your invoice, then you may need to take the debt collection process to the next level. Hiring a solicitor or a debt collection agency may be the motivation your customer needs to finally make payment, but if that doesn’t work, you may need to take the matter to court. At this point, you should consider whether the cost of litigation is worth it to settle the overdue invoice.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.