Your cash flow depends on invoices being paid in a timely manner. However, not every client or customer will pay the money they owe you on schedule. If asking for invoices to be paid is a pain point of running your business, there are best practices you can consider to encourage on time payments. Here are guidelines to help, email templates you can personalize, and billing best practices.
These guidelines are provided for educational purposes only. Be sure to consult with legal counsel regarding any practices or procedures you may develop or implement for collecting payments.
How to ask a customer to pay their overdue balance
Be professional, polite, and to the point. Before you reach out, consider these details:
- Did you complete the work per the contract or agreement? Double check that the job you have finished for your customer or client was done to their satisfaction and that all deliverables (if applicable) have been delivered.
- Invoice promptly. Send the invoice as soon as the work was completed to keep your business top-of-mind. An invoice that arrives weeks or months after the work was completed might end up on the bottom of the pile.
- Include a due date. If you don’t give a deadline for payment, you’ll likely be last on the list to get paid.
- Don't deliver your service until you are paid. If payment is due before products are delivered or service is complete, make sure your terms of service clearly outline the guidelines.
Ways to ask for overdue payments
1. First email
Send a friendly email reminder one week before the invoice due date. Your customers will appreciate the heads up so they can plan accordingly. Here’s an example:
To: Bob
From: Jane
Subject: (product or service)
Thank you for choosing our business for ___________. We appreciate your positive feedback and it was a pleasure to work with you! This is a friendly reminder of your payment due ______. The total of _______ is reflected on the attached copy. The complete amount is due at that time. You can pay via _______________.
If you have any questions, please feel free to contact me.
Business Owner
Title
Contact information
Website
There are elements that make this email effective. The friendly tone helps to develop a respectful relationship based on professionalism. Note that this is the first correspondence regarding payment and doesn't need to be serious. Additionally, the subject line doesn't mention invoice or amount so it’s more likely to be opened.
2. Second email
If you don’t get a response, send another email on the day payment is due to give a gentle reminder.
To: Bob
From: Jane
Subject: Invoice for $ _______ due today
I know you’re very busy but wanted to surface this again in case you missed it.
Payment on invoice #_____ for $______ is due today. Please note that a late fee will be added if not paid by EOD.
I’ve attached an invoice and email from here. Feel free to call me at ________ if you have any additional questions.
Business Owner
Title
Contact information
Website
The second email is a bit more serious than the first (no exclamation points). It’s positioned as helpful, showing how to avoid a late fee. Also included is a direct way to reach the person sending the email – whether that be the business owner or the company’s financial representative.
3. Third email reminder
Your cashflow may be suffering and it’s time to get a little more serious. Send this email one week after the payment was due. Write a sterner email with a reminder of penalties.
To: Bob
From: Jane
Subject: Please act now to avoid additional late payment penalties
Please note that invoice #_______, originally sent on _______ is now overdue and a penalty of ______ has been added to your total. An invoice reflecting the updated amount due is attached.
Thank you for your attention to this matter. Please feel free to contact if you have any questions.
Best regards,
Business Owner
Title
Contact information
Website
4. Final email reminder
Send 1 month after the late payment was due. This gives the client a heads up that the invoice amount has increased. Send along a new invoice including the late payment penalty.
To: Bob
From: Jane
Subject: Overdue invoice
Please note that invoice #_______, originally sent on _______ is now overdue and a penalty of ______ has been added to your total. An invoice reflecting the updated amount due is attached.
Thank you for your attention to this matter. Please feel free to contact if you have any questions.
Best regards,
Business Owner
Title
Contact information
Website
6. Contact the client directly
Picking up the phone might not be your favorite thing to do. If you’re prepared, you can get your payment and maintain a good relationship with your customers. Be professional and deal only in facts so the conversation does not get emotional.
Have all information in front of you including the original invoice with date and scope of work outlined, a record of when and how you’ve reached out for payment, notes of your interactions to date.
At the end of the call you should have resolved any disputes and established an expected payment date. Be sure to document your conversation, as well.
How to help prevent late payments before they occur
Before you start chasing customers for payment, put the following best practices in place:
Have a written contract
The days of a “gentleman’s handshake” are long gone. You should have a template outlining the scope of work, payment expectations and standard terms for enforcing payment obligations . Both parties need to sign and date. Consider involving legal counsel to review any contract terms you may develop.
If late payment is made, consider charging allowable interest
The due date and interest rates must be clearly outlined on your invoice. Check with your state's usury laws. The maximum amount of interest you can charge varies from state to state and from year to year.
Provide an incentive for early payments
Incentivize customers to pay early with a small discount. Outline the number of days early the invoice must be paid in full to earn the price reduction. Be sure to outline details in your contract.
Consider invoice factoring
Through invoice factoring, a company sells its accounts receivable. Factoring allows an outside company to purchase the outstanding funds due to you at a discounted price in exchange for providing cash up front. This may improve working capital and can save you the headache of chasing payment, freeing up your valuable time.
Handle invoicing 100% electronically
Purchase or upgrade to accounting software that offers the option to send emailed invoices. You can include a link to a secure payment portal so customers can easily pay online. Some systems let customers sign up for recurring payments too. Check out this list from Capterra if you’re in the market for a new or upgraded system: Best Billing and Invoicing Software 2020.
