What Is a Past Due Invoice?

A past-due invoice is an unpaid bill, indicating that the recipient has failed to make the payment even after the due date has passed. It serves as a reminder that the buyer must fulfill their payment obligations immediately to avoid accumulating late penalties.

Sellers typically set short payment terms, such as Net 15 or Net 30, on an invoice. If an invoice surpasses its due date, it is considered past due. When past-due invoices start piling up, they can significantly impact your bottom line and may lead to financial instability.

Now, let us tell you how to collect past due invoices in 6 steps so that you get paid in a short time.

How to Collect Past Due Invoices

Explore these 6 steps to help you receive payment for past due invoices as soon as possible.

1. Identify Overdue Invoices

Collecting past due invoices requires patience whenever you deal with overdue payments. Remember you need to make sure that it is a past due invoice and not the outstanding one.

This is because a past due invoice appears only after the due date has passed and still you haven’t received the payment. At this stage, confirm all you have in hand are past dues invoices and the information is correct.

Also, check if you have made any payment requests recently to clients. There is a minimal chance that you get paid even after 60 or 90 days, so it is better to put your plan into action.

Generate a report using invoicing software like Moon Invoice so that you get a clear idea of how much is unpaid amount and time overdue.

2. Issue an Overdue Notice

When you have a list of past due invoices ready, now is the right time for a nudge. You can issue the overdue notice to the client, reminding them about outstanding payments, which need to be cleared at the earliest.

Sometimes late payments could be only because clients have forgotten to pay dues and all it requires is a gentle reminder.

In other cases, customers may have issues regarding payment processing, so ask them to settle dues using different payment methods. You can list out different payment methods in the email while requesting payment so that anyone having issues with payment can transfer money online.

This primary notice is only to remind them of payment terms & conditions which they might have agreed to before availing of your service.

3. Follow-up (If Required)

If sending overdue notice doesn’t help you in recovering past dues, consider sending a follow-up email. Undoubtedly, there is no harm in setting a tempo and sending email reminders until you get paid.

Encourage your accounts receivable team to take action and prevent past due invoices for more than 90 days, which might become uncollectible. While sending a follow-up email, you must clearly highlight the consequences of non-payment within the given time frame.

Keep in mind that your goal is to receive payment without burning the bridges so it’s better to use your professional tone. The use of rude language will not only cause delays in payments but also negatively affect the relationship.

In most cases, what customers need is a short and gentle nudge to process a payment.

4. Contact Your Customer

Following 2-3 past due invoice reminders, you would have made up your mind to contact the customer through a phone call, and that exactly should be your next move. Connecting over the phone will at least help you initiate the conversation with the clients.

So, do keep a script and a copy of the past due invoice ready before you dial the phone number as clients may ask multiple questions. Once connected, you can get answers from clients regarding lengthy delays in receiving payments even after sending email reminders.

Below is one such example of how your call script should be for starting the conversation about past due invoices.

5. Discuss With the Accounts Team

Even after making a phone call, if the payment is somehow not received, then there are strong chances of dispute, which you should not let happen no matter what. Therefore, hold talks with the sales or account receivables team because they usually have a healthy relationship with customers.

Let your account manager engage in conversations with clients to answer their queries and encourage them to clear dues. In case efforts made by your account team are not enough, you may have no choice but to approach a debt collection agency.

6. Start Legal Proceedings

When nothing works in your favor, the last option is to start taking legal action by knocking on the door of Small claims courts. Imposing late fees and continued delays in payments can only hurt your business. So, it’s better to hand over the matter to the court instead of making an effort that won’t even be worth it.

Initiating legal actions may require guidance from legal professionals. Discuss with lawyers about clients being unresponsive for such a long time. It is advisable that you must know the complete legal procedure before escalating legal actions against past due accounts.

Past-due Invoice Email Templates

While there is a lot of time required for preparing email reminders manually, it is better to get ready-made email templates that help you create and send an email reminder in a professional way. Here are examples of how to write email templates.

Past Due Invoice Email – After 30 Days

Your first email after completing 30 days from the due date should be formal and direct to the point. A use of politeness is important but email should create a sense of urgency.

Professional emails made using templates will grab customers’ attention in a minute, leaving no chance of oversight and accelerating the payment process.

Here’s an example of 30 days past due invoice email template:

Past Due Invoice Email – After 60 Days

If you haven’t received the payment following 60 days from its due date, then certainly there is less chance of you getting paid.

This time you need to prepare a firm email rather than drafting a politely-worded email. Post 60 days you can also take a follow-up via a phone call after sharing an email.

Your past due invoice email template post 60 days should be like this:

Past Due Invoice Email – After 90 Days

If your previous effort didn’t pay off, then post 90 days you have a strong chance of getting in touch with the debt collection agency rather than waiting for a payment.

Approaching a debt collection agency can lead to serious consequences for customers. Therefore, it’s better to send a final notice reminding clients about starting legal proceedings.

Upon the completion of the 90 Days, the email should be like this:

When to Send Payment Reminder Messages?

As a seller, you can dispatch the payment reminder right after the invoice is due. You can even send a reminder when approaching the due date, urging clients to follow their payment responsibilities. If the client holds a satisfactory payment history, create a payment reminder using an email template professionally and send it days after an invoice is due.

However, if the client is delinquent, you can send the payment reminder upfront, requesting to complete the due payment as quickly as possible. Notably, every invoice may have different payment terms, so it is important to send payment reminders only once the payment deadline is over.

Effective Tips for Following Up Past Due Invoices

Here are some actionable tips to remember while taking follow-ups for past due invoices.

1. Clearly Define Purpose

Let the recipient know the purpose behind sending a payment reminder. Use readymade email templates to enhance the quality of your reminder letter and help the buyer easily learn about their pending dues.

2. Fill in Accurate Details

Make sure you only enter the correct invoicing details and only send a reminder once the payment deadline is over. You can use several invoicing software or tools to make accurate email reminders instead of relying on error-prone paperwork.

3. Use Professional Tone

Maintain a respectful tone throughout the payment reminder letter in such a way that it should not sound demanding. Generate a payment reminder that professionally demonstrates your commitment to handling clients with respect.

4. Offer Multiple Payment Options

Attach a payment link whenever you compose a new payment reminder or if possible offer different payment options. Such cashless payment methods will ensure clients pay attention to the reminder and process the payment.

5. Don’t Use Aggressive Language

Stay away from using harsh words that might damage your client’s relationship and make it difficult to bring in new clients. Tell them politely why there is a payment urgency and also emphasize the need for timely payments.

Moon Invoice – The Only Invoicing & Payment Solution You Need

Collecting past due invoices can be a daunting task, but it doesn’t have to be when you are using Moon Invoice. An invoicing software, Moon Invoice is equipped with advanced features that will not only help you make beautiful invoices but also draw payments faster.

With Moon Invoice, you no longer need to waste time making invoices from scratch. Get readymade invoice templates from Moon Invoice, fill in the required details, and send a high-quality invoice directly via online platforms.

If required, you can even get the benefits of readymade email templates to send a payment reminder in a professional manner. That’s not all, even you can track unpaid invoices, get notified about payments, and also dispatch automatic payment reminders.

Conclusion

Businesses dealing with frequent late payments can lead to serious problems in their daily operations. No business has extra time for taking constant follow-up with past due invoices as it makes your business financially unstable.

Agreed, there are ways to recover payments, but taking prevention before even such a situation arises can save you time and effort.

Using automated invoicing software is your only solution to such recurring problems. Software like Moon Invoice will eliminate your struggle of chasing unpaid invoices. You can generate perfect invoices with readymade template designs and integrated payment options that significantly reduce past due invoices.

Start using Moon Invoice for free.

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