Reminder letters are tough, aren’t they? We have to be sensitive, but firm. There may be a legitimate reason why the customer couldn’t pay on time and we have to take this into account. We also, usually, want to maintain a positive relationship with the client—it’s likely that their failure to pay is a one-off situation and you may want to do business with them in the future. They may simply have had a busy time and overlooked your payment …
Cristina from Italy asked me on LinkedIn if I could provide some tips on writing reminder letters for late payments, so I’ve been doing some research and come up with some guidelines and phrases you may find useful if you have to write such letters.
The other thing to keep in mind is that sometimes you need to write a series of collection letters. The first will be gentle, but the tone will become progressively stronger, culminating with the threat of legal action. I hope you never have to go this far, but you may have to.
What needs to be in a collection letter?
Here is a list of things to include that you can use as a template when you’re writing your own letters.
- Start by providing all your details so that your client can see, at a glance, who the letter is from. Ideally you will use your company letterhead for this.
- Include a subject line with a short description of what the letter is about.
- First paragraph—state that the letter is to remind them to pay. Specify the amount, and the due date. If it’s not the first letter in the series, mention the previous reminders you have sent.
- Second paragraph—you may include your understanding of the reason for the delayed payment, but it’s not essential.
- Include a sentence that they should ignore this letter if they have already paid the account, that is, if your letters crossed in the mail.
- Final paragraph—mention what specific action you want them to take and the last possible date for that action. Also give them the opportunity to contact you to discuss payment options.
- Sign off with your signature, name and designation.
Things to remember when writing a collection letter
- Use your company letterhead.
- Use a polite tone, but be firm.
- Remain aware that there may be a legitimate reason why they haven’t been able to pay, and consider any problems they might be facing. In most cases the long-term relationship is valuable and important.
- Emphasise that it is in the client’s best interest to pay the amount, or to make an arrangement to pay the balance over time. If they don’t pay it will affect their credit rating.
- Always include a subject line and mention the number of reminders (i.e. First reminder, second reminder, third reminder, final reminder.)
- In most cases you would treat the third reminder as the final reminder.
- The intensity of your warning, and your firmness, increase with each reminder letter.
- Include the date the payment was expected, and the final date that they can pay.
- Include details of any penalties you propose—including a reference to your original agreement.
- Give the person the opportunity to pay you in instalments.
- Always include a sentence asking them to ignore the letter if they have already taken action.
- When a customer responds to your collection letter, even if they haven’t paid in full, stop the series.
Which sentences you use, and how you write the letters, depends on your relationship with your customers, and possibly also the size of the debt. These sentences are just suggestions.
This letter is to remind you that invoice number nn is overdue for payment. The payment should have been made by [date].
Just a reminder that you have an outstanding invoice with a past due balance of [amount]. We would be happy to discuss any questions you have about this account.
This is just a friendly reminder that your account with us appears as past due. Our records show that you have a total outstanding balance of [amount]. We would appreciate it if you could let us know the status of this payment. Please call us if you have any questions about the balance due on your account.
Our records indicate that we have not received your payment of [amount], which was due on [date].
I am writing to inform you that we have not received your payment of [amount], which was due on [date].
Since you are our regular client, we are offering you nn additional days to make the payment. Please make the full payment of [amount] by [date].
We understand that payments are sometimes overlooked and we would like to remind you that we have not received your payment of [amount] which was due on [date].
Thank you very much for your attention to this matter and your continued business.
Getting firmer now …
I would like to draw your attention to our terms and conditions, which provide for an interest charge of n% per month on late payments.
As we have a long term association with you, we have not levied any interest charges on the outstanding amount at this stage. However, as the account is now [time period] past due, the terms of our agreement allow for us to charge interest at the rate of n% per month on the outstanding payment. If we receive your payment in full by [date] we will waive these charges. However, if the account is not settled, we will be forced to review this decision.
We cannot understand why you still have not cleared your balance of [amount] which is now [amount of time] overdue.
Although you have been a reliable customer for nn years, we are afraid you are jeopardising your credit standing. By sending us your payment immediately, you can ensure your reputation and secure the convenience of being able to make future purchases on credit.
Based on your credit history, we provided you with credit terms on your purchase of [product or service]. The terms of the agreement provide for a payment within the specified period, by [date]. A payment of [amount] will protect your credit rating, and allow us to update your account.
I am writing regarding your payment. We have not received payment on your account for [n months]. I am sure you understand that it is not possible for us to continue to carry this debt. Please contact me as soon as possible so that we may remedy this situation. Perhaps we could discuss an alternative payment plan.
They still haven’t paid. It’s time to be tougher …
Despite a number of phone calls to your office and your assurance that the invoice would be paid immediately, we still have not received your payment of [amount], which was due on [date].
If we do not receive your payment by [date] we will reluctantly be forced to seek the intervention of our debt recovery agency, [name of debt recover firm here].
In line with our credit policies, we will now impose of a fee of n% for late payment.
To avoid additional charges, and legal action, please forward your payment as soon as possible.
As n months have passed since the due date, we are forced to take action to repossess the [product]. If we do not receive your payment, or hear from you, within the next n business days, we will contact you to arrange an appointment for repossession of the [product].
If we do not hear from you before close of business on [date], we will be forced to take legal action.
After repeated reminders unfortunately we still have not received your payment and you have not contacted us to make alternative payment arrangements. Our representatives will arrive at [address] on [date] at [time] to reclaim the [product]. If this time is not possible, please contact me to arrange an alternative time and date.
If we do not hear from you, and if we are unable to reclaim the [product] on that date, we will immediately take legal action.
I would be grateful if you would contact me when you receive this letter so that we do not need to take the matter further.
Our collection department has informed me of their intention to take legal action as you have failed to answer any of our requests for payment of the [amount] which is now [time period] overdue.
Before taking this action i would like to make a personal appeal to your sound judgement. I feel certain that we can find some way to settle this matter out of court if you phone or meet me. Therefore, please contact me by [date] so that we can avoid taking legal action.