Chasing debtor payments is critical to survival for most businesses. The fact of the matter is if you have completed work and incurred overheads along the way you should get paid promptly.
If you are fed up waiting to get paid for work completed you are not alone. The FSB estimated that 70% of SMEs have to wait outside of the original payment terms.
Before firing off a letter its always better to make a call first then follow up with a letter. Do your homework and make sure you understand who has the real control of company finances. It may not always be who you think it is. This is very common with family run businesses.
When to Use a Debt Recovery Letter
- When the standard payment terms have passed
- When you’ve already followed up with a reminder
- When you’ve followed up with a polite phone call
Check that the Late Invoice Hasn’t Been Contested
Always check too that the invoice itself has not been contested. To give yourself a fighting chance make sure you have good, sign off procedures for work completed, or supplies provided.
If you are getting nowhere fast then you may need to escalate matters.
How do I Write a Legal Demanding Payment Letter?
When a client has paid you late, and is not responding to polite requests, you should feel confident to use strong language and the threat of legal action, even if it is not in your experience to do so.
You have a business of your own to run and the very business of chasing debt is taking energy away from that. So a line has been crossed and it’s now your responsibility to firmly point out that this is the case.
The letter should be firm, factual, and without recourse to emotion or unnecessary detail. Just report the important information, how long overdue the debt is, and make it clear what you intend to do if this request is not listened to.
Any system of debt collection, including those used by HMRC, works on the basis of strategic escalation. You inform someone what the situation is now and then what is going to happen if they don’t pay.
The idea is to exert increase amounts of pressure, while remaining fair and professional. But to make it clear you intend to be paid and that it’s your legal right to do so.
Free Sample Late Payment Letter Template
If a business or private individual owes you money that remains unpaid after several reminders, this letter is an effective method of issuing a final payment demand before you take legal action.
[Name and address of organisation you’re writing to]
[Your business’s address]
Account No: [Your account number] Amount overdue: [Enter amount]
I am writing to you because the payment for invoice no. [Enter invoice number] is now [number of days] days overdue.
I have not heard from you regarding the invoice and you have not queried your account, so I can assume the balance is not disputed.
Please find a copy of the invoice enclosed. Unless payment is made by [Enter date], I will be left with no option other than to take legal action to recover the money you owe.
In this case, court costs will be added to the debt and your credit record will show a county court judgement against your business’s name.
To prevent legal action, please contact me within 14 days of receiving this letter to discuss paying the amount you owe.
Thank you in advance.
[Your full name]
[Your trading name]
When a Strong Late Payment Letter Doesn’t Work
If a strong letter hasn’t worked, you need to accept that the client either can’t or won’t pay. At this point you have no choice but to escalate the situation further if you want to be paid.