Late payments can disrupt cash flow, causing unnecessary stress for your business. An effective past due notice can help you collect on outstanding invoices while maintaining positive relationships with your customers. In this guide, we’ll discuss how to write an effective past due notice, best practices to maintain a positive customer relationship, and outline key steps for improving your overall invoice collection rate.
What Is a Past Due Notice?
A past due notice is a written communication sent to a customer who has not paid their invoice by the due date. The goal is to remind the customer about the overdue payment, provide them with the necessary information to resolve it, and encourage them to take action promptly.
A past due notice is just one communication in an invoice collections sequence. Download our end-to-end collections template.
Key Components of an Effective Past Due Notice
To write a clear and actionable past due notice, ensure it includes the following elements:
- Friendly reminder of the overdue status
Open with a polite tone. Assume the missed payment was an oversight rather than a deliberate action. A soft reminder can maintain a positive relationship while prompting immediate action. - Invoice details
Include all essential information such as the invoice number, amount owed, original due date, and any applicable late fees. This ensures that the recipient can easily identify which payment is overdue. - Clear call to action
State what the recipient needs to do next—whether that’s submitting payment, reaching out for more details, or discussing payment options. Be direct but courteous. Limit the number of options you provide. - Payment options and instructions
If there are multiple ways to pay (credit card, bank transfer, etc.), make sure these are clearly listed. Providing payment links or instructions can speed up the resolution process. - Consequences of non-payment
Without being too harsh, mention the potential consequences of continued non-payment, such as additional late fees, suspension of services, or legal action. Start with no consequences and then escalate with each email. - Contact information
Ensure the customer knows how to reach you if they have any questions or need assistance with their payment.
Example of a Past Due Letter
Subject: Payment Reminder for Invoice #12345
Dear [Client's Name],
I hope this message finds you well. We wanted to remind you that your payment for invoice #12345 in the amount of $[amount] was due on [due date]. As of today, it is now [X] days past due.
Please remit payment as soon as possible. You can make the payment via [payment options]. If you have any questions or concerns, feel free to reach out to our billing department at [contact info].
Please note that if payment is not received by [new deadline], a late fee of [amount or percentage] will be applied.
Thank you for your attention to this matter. We appreciate your prompt response and value our continued partnership.
Best regards,
[Your Name]
[Your Title]
[Company Name]
[Contact Information]
Best Practices for Writing Past Due Notices
- Send at the Right Time The past due notice should go out in a timeline manner, at regular cadences, and at the right time of day. Delays in sending the notice communicate that collecting on this payment isn't a priority. Gradually increase the frequency of messages as the invoice ages.
- Set the Right Tone The tone of your past due notice should reflect your relationship with the client and the severity of the delay. Early notices should remain professional and courteous, avoiding aggressive language. As the payment becomes more overdue, you can gradually increase the urgency while remaining respectful.
- Personalize Your Message Avoid sending out generic past due letters. Including the client’s name, specific invoice details, and relevant contact information shows that you are paying attention and taking their situation seriously.
- Offer Flexible Solutions Sometimes, late payments are due to cash flow issues on the customer’s side. Offering payment plans or alternative payment options can help resolve the issue without damaging the relationship.
Improving the Odds of Payment on Overdue Invoices
When payments are overdue, it’s essential to communicate with all relevant parties, both internally and externally. By managing the situation proactively and involving the right people, you can increase your chances of receiving payment while maintaining strong client relationships.
Internal Escalation Process
Before taking any action externally, ensure your internal team is aligned on how to handle overdue payments. The first step is to establish clear thresholds for when overdue invoices require escalation. These thresholds can be based on how many days the payment is overdue—such as 30, 60, or 90 days—or based on the invoice size.
Your sales team should also be part of this process, as they often have the closest relationship with the client and can help resolve issues diplomatically. Sales can check in with the client to see if there’s a reason for the delay and if a resolution is possible without more formal escalation.
In cases where internal communication isn’t enough, and the invoice remains unpaid, your legal team should be informed. This ensures that any future steps, such as pursuing legal action or applying penalties, are handled appropriately. However, the involvement of legal should be a last resort, only after other internal efforts have been exhausted.
Customer Escalation Process
Externally, escalating overdue payments to the right contacts within the client’s organization is crucial. Initially, you’ll want to ensure that your communication reaches the accounts payable or finance team, as they are typically responsible for processing payments. However, if the payment continues to be delayed despite follow-ups, it's time to involve more senior contacts.
Start by escalating to department heads or managers who oversee the financial operations. If this doesn't yield results, you may need to reach out to executives who have decision-making power and can expedite payment.
Throughout this process, maintain a professional tone in your communications. Keep your escalation clear, but polite, highlighting that you value the client relationship and are looking for a timely resolution. By involving the right people early on, you improve the chances of resolving the issue without damaging the long-term relationship.
Conclusion
Writing an effective past due notice involves striking the right balance between professionalism and urgency. By including the key components mentioned above, you can prompt your customers to take action without damaging your relationship. By carefully managing both internal and external escalations, you can handle overdue invoices more effectively. Having a structured approach helps ensure timely payments while protecting client relationships and avoiding unnecessary conflicts.
Addressing overdue payments with a thoughtful, well-organized approach will safeguard your cash flow and maintain trust with your clients.
