How to Follow-Up Past Due Invoice [6 Steps + Email Templates Examples]

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:

Why Do Customers Pay Late?

Delays in making payments from the customer’s end could have a multitude of reasons. Here are some of them you might want to know.

1. Undelivered Invoice

In most cases, customers do not clear past dues because they didn’t receive the invoice. This could be the case for companies using paper-based invoices, which easily get misplaced or fail to reach the recipients. Since they have no idea of an invoice, you can’t expect them to make payments. All you need to do is resend an invoice and make sure it gets delivered.

2. No Clear Payment Instructions

As an issuer, if you fail to write a clear payment instruction, then clients may delay the payments. This is because they have no idea of penalties or due dates, which possibly result in late payments. Those businesses issuing hand-made invoices are likely to experience payment delays due to unclear instructions.

3. Insufficient Balance

Not all the time it’s your fault, sometimes customers might go through hard times like having insufficient funds in their account due to poor financial management. Or else, they might have actually forgotten to pay the dues. If you have such customers who usually forget to make payments, then consider sending an email reminder in advance.

How to Prevent Past Due Invoices?

Now you know how time-consuming the process of recovering the due payments is. Hence, no wonder why we need to prevent past due invoices. Here are tips to prevent past due invoices.

1. Send Impressive Invoice

If past due invoices are piling up significantly, then something is wrong with your invoicing process. Try creating professional invoices in such a way that it should be easier to understand the due date, payment instructions, and total due amount. You can download ready-made invoice templates from invoicing software like Moon Invoice instead of using poorly-written invoices.

2. Introduce Late Fees

Come up with a more strict policy, including late fees for past due invoices. Since no customers afford to pay extra charges unnecessarily, you can see a significant drop in past due invoices or may not have any of them. Small businesses can start charging a late fee of 1% on the total amount due.

3. Enable Online Payments

Offering online payment modes will help you in tackling past due invoices. It allows customers to make payments without stepping out of their homes. In fact, there would be no more hassle of handing over the cash. Customers can use their preferred payment mode and complete the payment. To achieve this, consider sending an online invoice with a payment link.

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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