Payment reminder: How to write one to a client
All small businesses have had to grapple with the problem of chasing after invoice payments at some point in their daily operations. Overdue invoices can restrain optimum cash flows, forcing firms to opt for working capital loans to stay afloat. Sending polite and timely payment reminders to clients can help tide over this issue.
A firm’s long-term financial stability heavily rests upon its ability to collect its cash payments on time. Optimal cash inflows enable companies to meet their daily expenses and pursue growth opportunities.
However, owing to several factors, such as price disputes, lack of funds, or deadline misconceptions, clients may falter in their invoice payments. Presently, UK businesses are owed over £23.4 billion in outstanding invoices, with an average SME experiencing late payments to the tune of £147,141.
At this stage, sending a polite payment reminder email or SMS can do wonders for streamlining a firm’s cash collection cycle.
A payment reminder constitutes a part of a firm’s payment collection cycle. It is ideal to send a friendly payment reminder two-three days before an invoice becomes due. If the clients fail to honour their payments, stronger payment reminder emails may be in order after every two weeks or so.
Formal outstanding payment reminders serve as the last step before a firm seeks legal action. Below, we elaborate on a few tips that you can follow for drafting an overdue payment reminder.
Write on the company’s letterhead: This goes without saying, but irrespective of whether you are shooting a physical copy of a payment reminder or sending an email for overdue payments, it must be on your company’s letterhead to ensure a formal and professional look. Be sure to include your company’s name, address, contact information, and logos for a higher impact.
Add the invoice number and its due date in the subject line: A clearly worded subject line that involves the major details of the overdue payments is sure to grab a customer’s attention. It also makes it easier to discern which invoices are being discussed and the time left before the levy of late payment fees.
Touch upon invoice details in a polite tone: The first paragraph of your payment reminder should include all of the important details, such as when the amount is due or how far past due it is (if it is a follow-up email). Alternatively, you can also enclose the original invoice for better recall.
Elaborate on payment terms: A payment reminder must detail the payment terms agreed upon and also state the methods available to the client for meeting their obligations. As the weeks pass, a friendly reminder about the imposition of interest and late fees on outstanding invoices may be sent.
Include a deadline: For better results, a payment reminder must have a deadline. It creates a sense of urgency and outlines the time available to the client for making payments. In case the invoice has been outstanding for a significant duration, a warning may also be added for the next stage, such as legal action.
Encourage a response from the client: A payment reminder can encourage clients to state their reasons for defaulting on their payments and their plans for eventually clearing out their dues. You can close out the letter by stating you are looking forward to a swift resolution and are open to any concerns.
Maintain a firm attitude: The initial payment reminder email must be empathetic to a client’s needs, leaving space to account for events when the client simply forgot about the due date. However, if the invoice remains unpaid for an extended period of time, it is best to discuss court action, the associated fees, and the loss of brand reputation and business relationships.
Nailing a firm yet polite payment reminder email can feel like an onerous task. We have outlined a few payment reminder templates for your reference below.
Subject: Invoice No. #6789; Due: April 19, 2XXX
Dear XYZ Ltd.,
We hope this email finds you well. We are writing to remind you of the invoice that falls due for payment on (date). The invoice details are as follows:
- Company Name
- Invoice Reference Number and Amount
- Time left for due payment
- (Attach the original invoice)
Please confirm the receipt of this invoice and ensure that the payment has been scheduled. You can pay by credit card, cheque, or online through the (Pay Link). Please don’t hesitate to reach out in case of any queries.
Subject: Invoice No. #6789; Due Today
Dear XYZ Ltd.,
This is a reminder that invoice #6789, originally shared on (date), is due for payment today. You can choose to pay online (attach link), by cheque or by credit card. Kindly note that you will be liable to pay late payment fees if the invoice isn’t paid in full by today.
Please reach out to us in case you need any assistance in processing your payments.
Subject: Invoice No. #6789 is [time] overdue
Dear XYZ Ltd.,
This is our third/fourth/final reminder about the unpaid invoice (ref number) of (amount), despite becoming due on (date). A 10% late fee will be levied if the invoice remains unpaid by (date).
We are enclosing the original invoice for your perusal. Please make the payments immediately, or we will be forced to initiate legal action, which would entail the addition of court fees to your total dues.
We look forward to a swift resolution to this matter.
Note: In case you are wondering how to write a payment reminder SMS, you can follow the same body format, detailing the invoice number and payment details.
Firms can rationalise their cash flows and maintain optimum liquidity levels by effectively following up on outstanding invoices by sending their clients timely payment reminders. This process can be undertaken manually or can be automated for easy monitoring.