How to Write a Late Payment Letter + 5 Free Templates

What Is a Late Payment Letter?

A late payment letter is typically a notice asking your client to please deliver the payment for your product or service.

This can be sent in many different forms. Sometimes, you may start with a verbal heads up — a phone call or video call.

But oftentimes, if a client hasn’t paid on time, it’s hard to reach them on the phone.

You can send your customer a letter or an email to acknowledge they haven’t paid you and to request payment.

When Should I Send a Payment Reminder Email or Letter?

When it comes to communicating with your client about a late payment (or any payment), it’s a good idea to have a paper trail of how many times you’ve followed up regarding the expected payment.

Some small business owners like sending letters in the mail, and you can choose to do that too. However, you should have an electronic record of your communications, as well. This will definitely help come tax season, when you’ll report your earnings.

Fingers crossed you’ll be paid by then, but if not, having documentation of your requests, as well as them documented in your invoice tracking system (e.g., QuickBooks) can come in handy. By the way, QuickBooks and similar services sometimes offer automated payment reminder emails, which is an option to look into.)

To protect yourself, you want to ensure that you have documentation of your correspondence, if for some reason, your client can’t make a payment and you decide to consult a lawyer.

Because of this, we suggest sending late payment notices via email.

Late Payment Letter Template: What should they look like?

You know you have to send an email, but when, how many, and what should you include? We’ve laid out some examples for you.

Feel free to adjust the details to be more specific to you and your business, of course!

1. First payment reminder: One week before the payment is due

Email Subject: Reminder— Invoice #10427 is due next week

Message:

Hey, [First Name],

Hope you’re doing well. A week from today, payment for Invoice #10427, for insert product/service, is due.

Please take a look at the invoice and let us know if you have any questions.

Thanks and have a great day!

[Sender]

Why this reminder is important:

Preventive measures make all the difference. Giving your client a heads up that they’ll be owing you for the invoice in a week, gives them time to get their finances in order. It’ll also clue them in to the fact that you’re vigilant about tracking your invoices, meaning they may expect another follow-up if they don’t pay soon.

It’s worth checking to see whether your payment software (e.g., QuickBooks) offers links to invoices. If it does, you could consider utilizing that functionality in this type of email.

2. Second payment reminder: On the day the payment is due

Email Subject: Invoice #10427 is due today

Message:

Hi, [First Name],

This is a reminder that payment for Invoice #10427 (for $5,000), which we originally sent you on September 2, is due today. Details on accepted payment methods are included in the invoice.

If you have any questions, please let us know.

Thanks!

[Sender]

Why this reminder is important:

If your customer had any doubts that you tracked your invoices, then this email will confirm that. This is the first time in the email sequence that you’re asking your customer to make the payment, so make sure to keep your tone friendly. That being said, there’s no need to make this payment reminder email lengthy. Keep it short and to the point, and be sure to include details like the invoice number, amount due, and date originally sent.

What if you don’t hear back from your customer?

This is certainly not great news, but don’t panic. There are logical reasons why your client may not have gotten back to you.

Perhaps the email isn’t reaching the necessary person or inbox. We recommend reaching out to a client directing by picking up the phone. Give them a call and the chance to tell their side of the story. But don’t forget to make it clear that you expect payment for your work.

If you need further advice, it may be time to consider checking with a lawyer who specializes in small business claims and who may be able to suggest the right next step.

How to be proactive and avoid late payments

In my experience as a small business owner, I’ve been left unpaid and it’s frustrating on so many levels. I’ll admit that when this happened, I could’ve kicked myself and thought what could I have done differently?

When it comes to preventive measures, I now think of my business the way I think of my health. For example, I’d much rather take a vitamin and be diligent about my PT exercises now than have to face the cost of surgery down the road. And the same goes for my business.

I’d much rather focus on what I can do to prevent sending those five late payment reminder emails in the first place. That’s why I’m sharing some advice on how to make sure your clients pay on time.

Here are some things you can do to avoid writing a late payment letter:

* Make your terms clear

Your customer will have an easier time following your expectations if you clearly explain what they are. No one is a mind reader, right?

Before agreeing to work with a new client, lay out your terms in a written (and documented) agreement. State how and when you expect to be paid.

For example, do you prefer half of the payment be made upfront, and the other half when the project ends? Or maybe you expect payment within 14 business days of their receipt of the invoice.

Whatever it is, make it as clear as possible, and put it in writing.

This also is a great way to let your clients know what further measures you’ll take if they don’t follow the agreement — for example, charging interest if they’re past due by a certain amount of days.

That way, if you do have to follow up about late payments, you can refer back to this agreement, which you both signed.

* Start with a small project

If it’s your first time working with a client, there’s no shame in starting off with a smaller project, or even sectioning pieces of the larger project into smaller ones.

If you start off with a slower, lower-costing project, you can pay attention to your client’s behavior around payment. If they pay you without issue, then it’s likely safe to move forward. However, if with the initial small project, they’re late paying you, then you may be justified with your hesitation. Proceed with caution there.

* Offer incentives for early payment

Paying on time should be a standard rule of thumb. Unfortunately, though, in this day and age, so many people are busy with different things in their lives, that providing a bit of an incentive to pay early doesn’t hurt.

Consider providing a small discount or credit to a customer who pays early. Or maybe give them a discount on the next project you work with for them. Regardless of what you offer, remember to document the offering in your terms.

You Deserve to Be Paid on Time

Since you’ve made it this far, we wanted to tell you — you deserve to be paid for the work you’re doing.

We understand that reaching out so frequently to a client about a late payment isn’t the most uplifting thing on your to-do list. But it’s necessary. After all, you did the work, right?

Hopefully, sending a late payment letter helps you obtain payment and your customer had a logical reason for paying late. Regardless of the outcome, know that with the steps outlined above, you’ll be prepared to address a late payment situation with tact and professionalism.

Legal disclosure: This content is for general, informational purposes only and is not intended to provide legal, tax, accounting, or financial advice. Please obtain expert advice from industry specific professionals who may better understand your business’s needs.