Best Practices for Following Up on Past Due Invoices

Best Practices for Following Up on Past Due Invoices

An important step in the process of invoice management is following up with customers that are late on their invoices. In this guide, we explain how business owners in Singapore like you can establish a process for following up on past due invoices. Also, we show you how to write payment reminder letters, and how to ensure that they are getting paid by customers.

What Is a Past Due Invoice?

A past due invoice is a bill that a client has not been paid by the due date agreed upon in the invoice payment terms. Late payments can be extremely damaging to your business because they make it harder for you to pay your bills on time, and can negatively impact the company’s cash flow. While you need not panic when you notice there are overdue invoices, you should not procrastinate on following up with customers because you are worried about coming across as “too pushy”.

Here’s a step-by-step guide for effectively following up on overdue invoices:

Step 1: Always be polite

Send an email or give your client a phone call to remind them of the past due invoice. Sometimes, people simply forget about the invoice and a friendly reminder is all it takes to get them to pay.

Step 2: Create a follow-up schedule

A key reason that many business owners fail to successfully collect overdue invoices is that they do not have a solid system or schedule for following up with customers. We recommend sending them reminders at the following intervals:

  • 7 days before the invoice is due
  • On the due date
  • 7 days after the due date
  • 14 days after the due date
  • A final urgent reminder 30 days after the due date

You also have to decide what format you want to use for your reminders, be it emails, phone calls, or letters? Alternatively, you could use a combination of all three, where you send emails for the first two reminders, a letter for the final urgent reminder, and phone calls for all other reminders. Another option is to automate your invoicing process using an invoicing software, so that these duties can be carried out electronically. This way, you need not  create a system of your own!

Step 3: Penalise customers if it is not their first late payment

Car insurance companies penalise bad drivers that frequently get into accidents by charging them higher premiums. Similarly, if a client repeatedly fails to pay an invoice on time, you have can penalise them as well, so that they know that their behaviour is not acceptable. Better yet, you could choose to create a system in which you will no longer do business with a client if they fail to pay an invoice promptly for three times.

Here are two examples of payment reminder letters that you can use to either remind clients of an invoice that will be due in seven days, or due that day. Feel free to customise the template to suit your follow-up schedule:

Payment Reminder Letter: 7 Days Before Due Date

Subject: [Your Business Name]: Follow up on Invoice #XXXX for [Product/Service]

Hi [Client Name],

I hope this message finds you well. This [Email/Letter] is a friendly reminder that your payment for invoice #XXXXX for [Product/Service] is due 7 days from now, on [Due Date].

We wanted to take this opportunity to find out if you have had the chance to verify the details of the invoice we sent previously and see if you are on track for payment by [Due Date]. Just in case you have not received the original invoice, we have included another copy with this letter, for your review.

Please do not hesitate to reach out to us if you have any questions or concerns.

Kind Regards,

[Your Name]

[Your Company Name]

Payment Reminder Letter: Due Date

Subject: [Your Business Name]: Invoice #XXXX for [Product/Service] is due today

Hi [Client Name],

We hope that you are doing well.

This [Email/Letter] is to notify you that payment on invoice #XXXX for the amount of [Invoice Amount] is due today.

Since our records show that we have yet to receive your payment for this invoice, we kindly request that you confirm a date for your payment. If we do not receive payment by [Late Fee Penalty Date], we regret to inform you that a late fee will be charged.

We hope to avoid this situation, so if you have any concerns about this invoice, please contact us and we will be glad to help.

Thank you,

[Your Name]

[Your Company Name]

Sprout with Us!

Sprout Asia wants you to focus on what you do best, while we take care of the rest. That is why we offer budget-friendly accounting services, so that our experts can keep tabs on your invoices and manage your finances with ease, so you never miss out on a due invoice.  

Feel free to reach out to us with any questions you may have about our services, and we will respond to you within 24 hours.