Last editedApr 20232 min read
Late payments are an unfortunate eventuality for many businesses. Chasing clients for money can not only feel humiliating but it can feel like wasted time and resources too. But sooner or later, somebody is going to forget to pay more than 30 days after you’ve sent an invoice and you’re going to be left (at least temporarily) out of pocket. In that instance, it might be necessary to write a payment request letter to encourage clients to pay up fast.
The right time
Don’t let the late payment fester. Set a reminder to send a friendly follow-up message the day after they are due, particularly if the client in question has made a habit of paying late. If this fails to inspire payment, follow up again a week later with a slightly more severe late payment letter and then again after 30, 60 and 90 days. After 90 days, it might be time to turn the task over to a debt collection agency.
What to include in a payment request letter
What you should be including in your payment letter will depend on how long overdue the payment is. However, as well as the obvious things such as name, date, address and account or reference numbers, every letter should include the amount outstanding and the original due date alongside clear payment options.
How to collect payments with GoCardless
1.
Create your free GoCardless account, access your user-friendly payments dashboard & connect your accounting software (if you use one).
2.
Easily set up & schedule one-off or recurring payments via payment pages on your website checkout or secure payment links.
3.
From now on you'll get paid on time, every time, as GoCardless automatically collects payment on the scheduled date. Simple.
Outstanding payment letter template
The initial letter should include a polite and brief reminder that payment has yet to be received. At this point, you’re still trying to maintain a good relationship. The second letter, meanwhile, should also include any additional charges that might be incurred as a result of the late payment. Remain professional and express the urgency of the matter.
The third letter, meanwhile, should be a final notice that references all previous letters and explains the client is in breach of their payment terms. If you fail to receive any positive response after this final letter, you might need to enlist the help of a debt collection agency or solicitor.
Using the right language
Even in final notices, it’s never a good idea to use overly aggressive or confrontational language. Keep it polite and civil and use “please” and “thank you” as much as possible. Using the carrot over the stick has been proven to work many times before and is especially welcome in this current climate.
When it comes to offering incentives to pay and mounting late fees don’t seem to be having much of an impact then consider offering a payment plan. This will divide the total late fees into smaller and less daunting amounts and while you won’t get the entire payment right away, you will probably be more likely to get it eventually.
Utilising automation
One way to ensure that all invoices are paid on time, businesses can automate their invoice collection. All they need to do is set up their customers or clients with GoCardless, which will allow all payments to be collected automatically when they are due. Merchants can also make one-off payments seamlessly using the Instant Bank Pay service.
If you don’t want to take it quite that far, meanwhile, you can also use automated invoicing software to send late payment letters automatically at one-day, 30-day, 60-day and 90-day intervals. You can even include a personal message with each letter and the software should add late fees automatically too.
We can help
If you’re interested in finding out more about writing a late payment letter, or any other aspect of your business finances, then get in touch with our financial experts at GoCardless. Find out how GoCardless can help you with ad hoc payments or recurring payments.
