Wishes and Messages

Final demand for payment on delinquent account

  1. Home
  2. 1st Anniversary Wishes
  3. Final demand for payment on delinquent account
Final demand for payment on delinquent account
February 07, 2019 1st Anniversary Wishes 5 comments

Read more to download an outstanding payment letter template. Here's our guide to writing a polite nudge, clear reminder and final notice – check invoice that hasn't been paid, rather than an overdue account balance.

Overdue payments can cause chaos for small businesses. If your incoming cash is intermittent and unpredictable it’s much harder to manage your outgoing cash. Organising and polishing your overdue payment reminder communications is critical to having a functional collections process.

One of the best things you can do to encourage your clients to pay on time is to communicate with them regularly via an organised set of payment reminder emails.

But what to write in the emails? It’s important that all your communications reflect your brand and are professional and polite. You don’t want to ruin a good relationship with your client!

We’ve put together four separate overdue payment reminder templates, to help speed up your collection processes.

All the overdue payment reminder templates are customisable and ready for you to simply copy and paste and fill in your information.

Fluidly helps you distinguish your good and bad payers, showing you how long overdue your invoices are, so you can take appropriate action.

1. Reminder ahead of due date

Before an invoice is due, you should send your client an email detailing all the required information that is necessary for payment on time.

It’s a good idea to do this at this point so that you don’t get forgotten about. Ask the client to confirm that they have received the invoice, and acknowledge that the invoice is not yet overdue.

You might also enquire about whether there are any known issues that would delay payment. It’s helpful for you to know the expected date of payment when an invoice is going to be late.

Reminder email template

Subject: [your company] – [invoice ref number]

Dear [client name],

I’m contacting you on behalf of [your company] with regard to the following invoice:

[invoice ref number] / [invoice balance]

This invoice is due for payment on [invoice due date]. It would be greatly appreciated if you could confirm receipt of this invoice and advise as to whether payment has been scheduled.

I have attached a copy of the invoice for your reference. If you require any further information from our side, please let me know.

Best wishes,

[sender name]

Download a free payment reminder template [401kB]

2. Invoices less than 14 days overdue

When invoices are overdue by a few days, it’s appropriate to send the first communication to chase the payment up. When enquiring about late payments you should always be professional and polite in tone, and it’s important not to come across as accusatory.

If you charge for late payments, then this reminder is a good place to reiterate what the charges are.

First overdue payment reminder template

Subject: [your company] – Overdue Payment – [invoice ref number]

Dear [client name],

Further to my previous correspondence, I’m contacting you on behalf of [your company] with regard to the following outstanding invoice

[invoice ref number] / [invoice balance]

This invoice is now overdue (due: [invoice due date]).  It would be greatly appreciated if you could advise as to payment status.

If there are any issues delaying payment (e.g. missing invoice, incorrect information etc.) please do let me know and I can send the relevant information as the due date for this invoice has now passed.

I have attached a copy of the invoice for your reference.

Best wishes,

[sender name]

Download a free first overdue payment reminder template [401kB]

3. Invoices more than 14 days overdue

Once a payment becomes overdue, remember that you are legally entitled to add interest and compensation to an overdue payment. If you choose to employ these rights for your business, make this clear in your letter.

Second overdue payment reminder template

Subject: [your company] – Overdue Payment – [invoice ref number]

Dear [client name],

Further to my previous correspondence, I’m contacting you again on behalf of [your company] with regard to the following outstanding invoice:

[invoice ref number] / [invoice balance] / due date: [due date]

If you need any further information or documentation in order to pay this invoice, please let me know so I can provide this. Otherwise, please advise as to the status of this payment as it is now more than 14 days overdue.

I have attached a copy of the invoice for your reference.

Thanks for your help,

[sender name]

Download a free second overdue payment reminder template [401kB]

4. Extremely late invoices

At this point you have contacted your client repeatedly for payment on an overdue payment without any luck, this communication should let your client know that you are looking into other means to collect your payment.

Remember you are legally entitled to add interest and compensation to an overdue payment. If you choose to employ these rights for your business, make this clear in your letter.

This letter gives your client one more opportunity to pay, before you decide to proceed with legal action. This letter escalates the severity of the late payment.

Final reminder email template

Subject: [your company] – Final Reminder – [invoice ref number]

Dear [client name],

Further to my previous correspondence, I’m contacting you once again on behalf of [your company] with regard to the following outstanding invoice:

[invoice ref number] / [invoice balance]

This invoice was due on [due date] and remains unpaid.

Given the lack of response on your side after several attempts to contact you, we will shortly begin legal proceedings in order to receive the monies owed to [your company].

Immediate payment will result in us closing this issue without need for legal action.

I have attached a copy of the invoice for your reference.

Regards,
[sender name]

Download a final overdue payment reminder template [401kB]

5. Automate your overdue payment reminders

At Fluidly, we know that time can be of the essence for small businesses (we also know how long you spend chasing late payments – too long!). Managing your credit control is crucial, which is why we built an AI-powered cashflow forecast so you can distinguish who your good and bad payers are.

Having a transparent view of both debt and cashflow puts your finance team in the most insightful position possible – allowing you to spot the issues, take action and keep the company’s cash in a positive position.

Find out more about Intelligent Cashflow management with Fluidly

Share: Share on TwitterShare on LinkedIn

Start and run Business · Accounts and auditing · Reminders and If you send a payment demand yourself, you can also charge a the case to them for recovery of the debt if the claim remains unpaid. If the debt collection notice and payment demand do not achieve the desired effect, the final step in the.

Overdue payment reminder template

final demand for payment on delinquent account

You run a small business, and depend on clients for your capital. A client hasn't paid an outstanding invoice, even after you've sent reminder after reminder. It's starting to feel like that client is trying to avoid paying you. What can you do? You have several options, like selling the invoice or taking legal action, that might get you some or all of your money.

Here are 8 ways to ensure your clients pay you on time and what to do if they don’t:

1. Research the Client

Before you agree to work with someone, research the person. Does he or she have a local reputation for paying on time, or do other small businesses refuse to work with the person because of late payments? If the prospective client has a bad reputation around town, you might want to avoid dealing with him or her.

2. Make a Contract

You should have each client sign a contract with you before starting work. The contract should detail the project you'll be doing, how much the client will pay you, and when payments are expected. It will also state that you'll charge late fees if the client's invoice remains unpaid for a specific time. Be upfront about how much is the late fee. That way, if you have to take legal action, the client is legally bound by the contract.

3. Get Payment Upfront for Larger Projects

Many small businesses expect a percentage of payment upfront before work has started. Some expect payment during the project when each stage is done. This way, if the client doesn't pay the first invoice on time, you can stop working and refuse to finish the project until you get paid. Or you know not to even start the project if they won't pay upfront.

4. Charge Late Fees

Small businesses should always charge late fees for unpaid invoices. Set up a structure for late fees that you use on every client, ideally a written policy on the contract or invoices. Start small, perhaps 10 or 15 days after an invoice goes unpaid.

You can send a message beforehand that because the invoice has gone unpaid for so long, you're going to have to add a late fee if it isn't paid within 48 hours, or something similar. You did the work, and they aren't holding up their end of the bargain. So a late fee at this point is completely fair. Keep tacking on those late fees if they still haven’t paid after your reminder.

5. Try Other Contact Methods

So, your contact person isn't responding to your messages. Try reaching out to someone else at the company. Get an email address or a phone number from the business' website, LinkedIn account or social media profile. If sending online messages isn't working, call. If that doesn't work, and the client is in the same city as you, stop by the client's office. It might not be worthwhile for a $100 invoice that's unpaid, but if the client owes you thousands and is months late, an in-person visit could do the trick.

6. Stop Working

It probably goes without saying, but don't do anything more for a client with a late invoice. Many small businesses expect payment partway through the agreement to ensure that the client will actually pay. Plus, you have more leverage for getting that invoice paid if the client is still waiting on half of a project.

Whether you have more work to do for that client or the client wants to hire you for something else, don't do any more work until you get your money. Even after you get paid, depending on how much of a hassle it was, you should consider not working with that client again. If you do, charge them half upfront, and tell them you expect the invoice to be paid before the final project is delivered. Otherwise, find clients who will pay you on time.

7. Go for Factoring

With factoring, you sell your invoices to a company for upfront payment. Usually the company offers you a percentage of what the invoice is worth. For instance, Kabbage offers 75%, which is a great deal if you've been dealing with an unpaid invoice for months on end with no payment in sight.

Keep an eye out for additional transaction fees or percentage deductions before you do factoring. Losing a quarter of what you're owed isn't ideal, but if you're wasting too much time trying to get someone to pay a bill, factoring gets you a good amount of money and removes the hassle from your life. That way, you can focus on doing work for clients who actually pay their invoices on time.

8. Seek Legal Action

Many small businesses don't want to seek legal action because it's expensive, time-consuming and a little nerve-wracking. But if there's a small business lawyer in your area who charges good rates for sending letters for unpaid invoices, contact that lawyer. Sometimes just the threat of legal action is enough to spur people into opening their checkbooks.

You can also tell the client you'll be filing a claim in small claims court. Your state will have specific laws about how much the client has to owe for you to be eligible to go to court. It's usually in the thousands but under $10,000.

Small businesses don't have to let clients take advantage of them. Show that you're willing to stand up for yourself.

sample letter informing change of contact person
Email love letters
congratulations ordination christian
Writing an announcement
sample thank you notes for helping out
Short payment received letter
what should a letter of recommendation look like
Sample letter of transfer of job assignment

Collecting Unpaid Invoices the Easy Way

final demand for payment on delinquent account

Send a reminder or debt collection notice as soon as possible after the due date. Some businesses also outsource their debt collection (e.g. to a debt collection company).

Fees

If you want to charge a reminder fee, you must wait at least 14 days after the original due date before sending a reminder or debt collection notice. You can charge no more than two reminder fees - either for two reminders or for one reminder and a debt collection notice. If you send a payment demand yourself, you can also charge a maximum fee of no more than NOK 210 for this. Value added tax must not be added to these fees.

Inkassoforskriften - fordringshavers rett til gebyrmessig erstatning (in Norwegian only)

Penalty interest

When a customer fails to pay up, you can start adding interest to your claim from the day after the due date if you have specified a due date on the invoice. If no due date is agreed, you will not be able to start adding penalty interest to your claim until 30 days after the invoice date.

Finansdepartementet om forsinkelsesrente (in Norwegian only)

Interest rate

Twice a year, the Ministry of Finance sets a maximum rate for penalty interest.

Penalty interest between businesses

When the customer is a business, you can agree a higher rate for penalty interest than is stipulated by the Ministry of Finance. This must then be stated either on the invoice you send the customer or in a separate agreement. If you have not agreed a specific penalty interest rate, you will not be able to charge any more than the rate stipulated by the Ministry of Finance.

Penalty interest for consumers

With regard to consumers (private individuals), you are not permitted to charge more than the penalty rate stipulated by the Ministry of Finance.

Kalkulator for forsinkelsesrenten (in Norwegian only)

Forsinkelsesrenteloven (in Norwegian only)

Standard compensation

If the customer is a business or public authority, you can charge standard compensation for your debt collection expenses in addition to penalty interest. This compensation cannot exceed NOK 390. Standard compensation can be charged on the day after the due date on the invoice and is charged instead of any reminder fee.

Finansdepartementet om forsinkelsesrente (in Norwegian only)

Reminders

After the due date, it is up to you to decide how long you want to wait before issuing a payment reminder and the number of times you want to issue a reminder before you issue a debt collection notice. You can send out a reminder on the day after the due date if you wish. You can also send a debt collection notice on the day after the due date without any prior reminder.

The following requirements must be met if you wish to charge a reminder fee:

  • At least 14 days must have passed since the due date.
  • The reminder must be issued in writing. Electronic communication may be used if the notification is sent in a "satisfactory manner".
  • There must be a payment deadline of 14 days.
  • There must be a statement of what the claim concerns. However, it is sufficient to refer to the invoice number.
  • The amount

 

Debt collection notices

Before you to refer a case for debt collection, you must always send a debt collection notice. In principle, you can send a debt collection notice to the customer on the day after the due date. However, you should remember that you cannot charge a fee until 14 days have elapsed since the due date. It is important to follow the formal requirements for the validity of a debt collection notice.

  • Debt collection notices must be sent in writing. Electronic communication may be used if the notification is sent in a "satisfactory manner".
  • Debt collection notices must be clearly marked with "Inkassovarsel" (Debt collection notice) or "Varsel om inkasso" (Notification of debt collection).
  • They can be sent on the day after the due date stated on the original invoice if you do not wish to charge a reminder fee.
  • If you do not intend to charge a reminder fee, you must wait until 14 days after the due date before sending the notice.
  • The payment deadline must be 14 days.
  • It must be clearly stated that the case will be referred for debt collection or transferred to a debt collection agency for recovery if the amount is not paid.

Inkassoloven om inkassovarsel og betalingsfrist (in Norwegian only)

Disputed claims

If the customer does not agree with the claim, you can generally not refer the case for debt collection. In such cases, you must obtain a decision concerning the claim, e.g. from the Conciliation Board. This applies unless the arguments are obviously unfounded. It is you who must decide whether this is the case.

Referring the case for debt collection (external debt collection)

If you use a debt collection company, you can transfer the case to them for recovery of the debt if the claim remains unpaid. At what stage in the process you should refer the receivable to the debt collection company is up to you to agree. Many enterprises transfer all overdue receivables for collection by the debt collection company and let them do the entire job. Others opt to send reminders themselves first and then let the debt collection agency send the debt collection notice and the payment demand. In such cases, the debt collection company will normally retain the fees that are charged. On the other hand, you avoid having to spend time on the case.

Inhouse debt collection

If you decide to do all your debt collection yourself, this is known as 'inhouse debt collection'. Some enterprises opt for a 'pleasant' version and send several friendly reminders before sending a debt collection notice. Others send the debt collection notice on the day after the due date. How you do this is up to you to decide.

Debt collection

Once the receivable has been referred for debt collection, a payment demand will be sent. Payment demands cannot be sent any earlier than 14 days after the debt collection notice is sent and must stipulate a deadline for payment of at least 14 days. In the case of inhouse debt collection, as of 1 January 2019, you are not permitted to charge more than NOK 210 in fees for the payment demand.

Inkassoforskriften (in Norwegian only)

Forskrift om inkassosatsen (in Norwegian only)

Legal debt collection/Enforcement in connection with inhouse debt collection

If the debt collection notice and payment demand do not achieve the desired effect, the final step in the process is to recover the amount with the assistance of the enforcement officer.

Politiet om tvangsfullbyrdelse (in Norwegian only)

Example

Eksempelfirma AS has decided to recover the debt itself. They have decided to send one reminder before sending the debt collection notice. The procedure will then be as follows:

  1. A reminder with a fee of NOK 70 is sent 14 days after the original due date stated on the invoice, with a payment deadline of 14 days.
  2. A debt collection notice with a fee of NOK 70 is sent 14 days after the reminder, with a payment deadline of 14 days.
  3. A payment demand with a fee of NOK 210 is sent 14 days after the debt collection notice, with a payment deadline of 14 days.
  4. An application for direct distraint is sent to the enforcement officer for execution, i.e. legal collection of the claim with the assistance of the authorities (the enforcement officer).

Contractors seeking payment from clients and agencies for unpaid and overdue SG Accounting Nixon Williams Clever Accounts Father holding paying a contractor's invoice, particularly if it is the final invoice of a contract.

Got outstanding invoices? Here are 8 things you can do

final demand for payment on delinquent account

Grid Law founder David Walker advises a sole trader struggling to receive payments worth almost £7,000 from a building firm and clarifies the process of statutory demands.

Question

I found your website when I was researching statutory demands.

I am a heating engineer and run a small business as a sole trader. I have a situation with a builder who owes me approximately £6,600. The amount is made up out of three invoices for £1,700, £1,300 and £3,600.

The two smaller invoices are for jobs that are complete and the invoices and are now overdue. The £3,600 is a stage payment on a job I am part way through and am almost finished. On this job there is a further £1,600 that will be due on completion.

However, due to the payments that are overdue, I have informed the builder that I will not proceed with the planned work until all my invoices are settled.

Then, once the balances have been settled I will continue and complete works.

The builder did not like this and said I was holding him to ransom.

I replied saying that I have no choice. I run a small business and he cannot expect me to wait for payment to ease his cash flow on his projects.

There’s no dispute over the amount owed, he just keeps making excuses for not paying. For example;

“I’ve transferred the money”

“I’m going to the office to do it now”

“It should be in your account now”

I have since run a credit check on this builder and found that he has County Court Judgments (CCJ) against him and companies that have gone bankrupt etc. I can’t believe I was so naive as not to do a credit check in the first place. However, I was and this is my situation now.

My question to you is:

Can I serve a statutory demand without any notice that I am going to do it, or is there a legal procedure I need to follow in order to do that?

Or, is there another legal route that would be more effective in this situation?

My future position is that once I’ve been paid the money I’m owed I will not work for this builder again, other than to complete my works to date. So, the preservation of a business relationship is not required in this situation.

Answer

Thanks for your question.

It sounds like you have given the builder plenty of chances to pay so there is no need to do anything else before issuing a statutory demand. However, if you want to send him one final warning that this is what you intend to do, you can.

Statutory demands are not part of any court process, there are no fees to pay and they don’t commit you to taking any further action. Therefore, you’re not going to do any harm if you do send it without any further warning.

Serving a statutory demand can be a very effective way of obtaining payment because the consequences of not paying are severe.

After 21 days, if payment has not been made, you have the right to serve a bankruptcy petition against an individual or winding up petition against a company.

If the debtor wants to avoid this, they will usually pay up.

In your case, this may not be as intimidating for the builder as it would be for someone running a profitable business. It sounds like he’s been in this situation before and may just accept the consequences to avoid paying.

Is the builder operating through a limited company or is he a sole trader?

The reason I ask is that you need to choose the correct form. If the builder is a limited company, you should use form SD1. If he is an individual / sole trader, you should use form SD2.

Statutory demands for individuals and companies

Also, the rules for when you can issue a statutory demand against an individual and a company are slightly different. A company must owe you at least £750 and an individual must owe you at least £5,000.

In both cases, the debt must be undisputed.

As you are owed more than £5,000 and this is an undisputed debt, issuing a statutory demand and serving it on the builder is a good option for you.

__________________________________________________________________________________

How to issue a statutory demand and winding up petition

A statutory demand is a formal demand for payment and, if a client doesn’t pay, it can be used as evidence that they’re insolvent.

__________________________________________________________________________________

Disadvantages to statutory demands

Unfortunately, there are disadvantages to statutory demands.

One disadvantage is that if the builder doesn’t pay and you do follow up with bankruptcy or winding up proceedings, you will be just another unsecured creditor. You will rank alongside all the other unsecured creditors who are owed money by the builder and will be paid in equal proportions to them.

If the builder has any secured creditors, i.e. a bank which has a charge or mortgage over property he owns, they will be paid before you. If there are insufficient assets to cover all the liabilities you may only receive a fraction of what you are owed, if anything.

Another disadvantage of statutory demands is that they can only be used to recover undisputed debts.

Whilst your debt isn’t disputed at this stage, there’s always a risk that the builder will raise a dispute if you serve a statutory demand on him. If he does, then a statutory demand will no longer be appropriate.

Instead, you will have to issue a claim through the courts.

Going through the courts

Legal action through the courts is a little more time consuming than issuing a statutory demand. There are also more formalities and procedures to follow. However, as this will be a small claim (as it’s valued at under £10,000) the process is still relatively straight forward.

I explained the court process in more detail in a previous article “How to win a court case without a lawyer”.

When you issue a claim through the courts, there are fees to pay.

Court fees vary depending on the value of the claim. For your claim, valued at £6,600, it will be £455 (or £410 if you issue the claim online) but you are entitled to get this back from the builder if you win.

If you win, the builder will have another County Court Judgement (CCJ) against his name. However, from what you have said, it seems like this builder has been in this situation before.

So, if you win and he still doesn’t pay, you will need to take enforcement action against him. Most likely, you will use a bailiff to seize items of his property which can be sold to pay you.

Your only risk is that if he doesn’t have sufficient property to be seized, the process could make him bankrupt (or if he is running a limited company, it may end up being wound up).

Therefore, before starting a claim through the courts, it’s a good idea to assess the builder’s financial position as best you can. Carry out another credit check, look at what assets he owns and if he is running a limited company, look at the latest accounts.

You don’t want to spend more time and money pursuing a claim through the courts if, ultimately, you’re going to end up with nothing.

With statutory demands, you don’t really have this issue.

As I said above, there’s just one form to complete, no fees to pay and serving a statutory demand doesn’t commit you to taking any future action.

So, you could issue and serve a statutory demand and see what happens.

If the builder pays, great. If he doesn’t, you can make a choice depending on the circumstances.

You can either continue with bankruptcy or winding up proceedings, issue a claim through the courts or you could decide not to pursue this any further.

I hope this helps and if you have any further questions, please feel free to email me at [email protected]

Sign up to our newsletter to get the latest from Business Advice.


 

ABOUT THE EXPERT

David Walker

David Walker is the founder of Grid Law, a firm which first targeted the motorsport industry – advising on sponsorship deals, new contracts and building of personal brands. He has now expanded his remit to include entrepreneurs, aiding with contract law, dispute resolution and protecting and defending intellectual property rights.

Sample Letter - Explanation for Delinquent Payment - Free download as correct the payment history for my account at the following credit bureaus, which carry the history of my Sample Letter - Final Demand for Corrected Credit Report.

final demand for payment on delinquent account
Written by Mikak
Write a comment