How to write a Later Payment Letter – Sample Letter Template

Issuing late payment letters to your creditors is one of the keys to long-term survival for most businesses, there is a skill to chasing up outstanding debtor payments.

If you have completed the work you agreed to for a client, and you have done so on time, there is no reason why you shouldn’t receive prompt payment.

If you have a history of completing work and being paid late, you certainly aren’t on your own; this is a common problem in the modern business world. 43% of SMEs experienced late payments during 2018 and it is estimated that £13 billion is suffered in late payments by SMEs in total.

This can cause huge amounts of financial distress within a company of any size, particularly a small business.

When should I use a debt recovery letter?

Before you resort to sending out a debt recovery letter, you should weigh up your other options. These could include making a phone call and speaking to the business/individual that owes you cash. Beyond that, you could follow up with a letter if you feel the need to.

  • When the payment terms have passed
  • After already reminding the client
  • Once you have already conducted a polit phone call

Make sure the late invoice hasn’t been contested

You should check that the invoice has not been contested, as you don’t want to run into any unexpected errors throughout this process. Be sure that you have included strong sign off procedures for any work completed and all supplies delivered.

If you are struggling to make any progress here, you may have to speed up proceedings and take things to the next step.

How do I write a legal demanding payment letter? 

At this stage you should not shy away from threatening legal action and using strong language to get your point across effectively. This may seem out of character to you if you aren’t used to doing so, but once the payment date has passed, and your polite requests have been ignored, you need to take serious action.

In order to look after your own business venture, you should be trying your best to avoid wasting time on chasing debt. To do this, you must act quickly and make your actions count. Once someone crosses the line, they ultimately damage your business, which is something you cannot afford to allow. At this stage it becomes your responsibility to do something about it.

Your letter should be straight to the point, factual and formal. Do your best to avoid all unnecessary details, they will only waste time and take away from your overall message. Be sure to carry a serious tone throughout your writing and make things very clear for the recipient.

Focus on the important information, such as how long overdue the debt currently is, and point out what you are going to do if the issue isn’t resolved as soon as possible.

You should remain professional throughout your letter but be sure to put the pressure on your client, as you don’t want this final threat to be ignored. Think of this as a strategic escalation. It is your right to be paid for the work you have conducted, so you should let them know that.

Make sure your attentions are clearly apparent but ensure that you stay professional throughout the entire process.

What should a late payment letter include?

Hopefully there should only be a need to send one polite nudge for late payment. If you find that this is not the case, you may need further templates to get the message across, these should including a firm reminder and a final notice letter.

These are the details each late payment letter should include:

Late payment letter 1: polite nudge

  • your company name and address
  • recipient’s name and address
  • today’s date
  • a reference should be made to account reference numbers
  • the total amount outstanding
  • original payment due date
  • a brief explanation that no payment has been received
  • next steps (give the recipient the opportunity to contact you or pay within a specific number of days)
  • payment options
  • a clear reference to your payment terms

Late payment letter 2 : Late payment charge

  • your company name and address
  • recipient’s name and address
  • today’s date
  • a reference and/or any account reference numbers
  • the amount outstanding
  • a reference to your last communication
  • state that the payment is still outstanding, include charges to be incurred inline with current government legislation
  • next steps, including a cut-off payment date
  • payment options
  • reference to your payment terms

Free ‘Late Payment Letter’ Template  

One of the most effective ways of receiving payment after a business or private individual has failed to pay you on time, is by issuing a letter before action. Feel free to utilise our free template sample, which can be found below.

[The name and address of the business you are writing to]

[Your/your business’ address]

[The date you composed the letter]

Dear Sir/Madam,

Account number: [Your account number] Amount overdue: [Full amount here]

I wish to inform you that the payment for invoice number: [Invoice number here] is now overdue. [Include the original due date here]

After sending several reminders, in the form of emails and phone calls, you have failed to complete payment for the work that has been completed.

Find a copy of the invoice enclosed within this letter, which is acting as a final reminder that payment needs to be made as soon as possible. If payment is not made by [enter chosen date here], I will proceed with legal action to receive the funds that you owe.

If this next step must be taken, the full court costs will be added to the debt and your credit record will show a County Court Judgement against your company’s name.

Legal action can be prevented by contacting me within two weeks of this letter’s reciprocation. At this point we will discuss the payment of the amount you currently owe.

Thank you in advance for your future cooperation.

[Your signature]

[Your name]

When a late payment letter fails to work

If this still doesn’t get your client to pay the amount they owe, you can pretty much accept that they are never going to willingly part with the cash. This first task is to ensure the business has not closed down or entered liquidation. From this point onwards you will need to escalate the situation to receive payment.

Business Finance specialist at Invoice funding | + posts

Seasoned professional with a strong passion for the world of business finance. With over twenty years of dedicated experience in the field, my journey into the world of business finance began with a relentless curiosity for understanding the intricate workings of financial systems.

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