Unpaid invoices: How to chase payments and protect your cash flow

Published Friday 7 November 2025

Table of contents

• How do unpaid invoices affect your business?
• How to write professional emails for outstanding invoices
• Outstanding invoice email templates
• When to send payment reminder emails
• How to chase late payments
• When you still don't receive payment
• Tips for avoiding late payments
• What's the difference between outstanding and past due invoices?
• Streamline your invoicing and payment collection
• FAQs on chasing outstanding invoices

Key takeaways

• Implement a structured email reminder schedule by sending the first gentle reminder 1-3 days after the due date, a formal follow-up at 14 days, and a final notice at 30 days overdue to maintain consistent payment collection without appearing pushy.

• Include essential details in every payment reminder email such as the original invoice number, total amount due, payment due date, and clear payment instructions to eliminate confusion and make it easy for customers to pay promptly.

• Escalate collection efforts systematically by progressing from polite email reminders to phone calls, then to pausing work until payment is received, and finally considering debt collection services or legal action for persistent non-payment.

• Prevent late payments proactively by requesting partial payments upfront, offering flexible payment plans for large invoices, and using automated accounting software to track outstanding invoices and send reminders before they become overdue.

How do unpaid invoices affect your business?

Unpaid invoices are bills you've sent that haven't been paid by their due date. They can disrupt your cash flow and make it harder to run your business smoothly.

Here's how unpaid invoices affect your business:

• Cash flow disruption: You can't cover essential operating costs when payments are delayed
• Supplier relationships: Late payments to your own suppliers damage your credit rating
• Financial planning: Unpredictable income makes budgeting and growth planning impossible
• Business reputation: Your professional relationships suffer when you become the one chasing payments

Unpaid invoices can affect your relationships with suppliers and your credit rating. Staying on top of payments helps you maintain strong business connections and a positive reputation.

Successfully invoicing and managing unpaid invoices is crucial to sustain your business's long-term financial health.

How to write professional emails for outstanding invoices

A clear and professional email is often all it takes to get an invoice paid. It keeps the conversation friendly and gives your customer an easy way to respond. Here's how to make your emails effective.

What to include in your payment reminder email

To avoid confusion, make sure every reminder email includes these key details:

• The original invoice number
• The total amount due
• The payment due date
• A link to the original invoice (if possible)
• Clear instructions on how to pay

Email subject lines that get attention

Your subject line should be clear and easy to understand at a glance. Try one of these simple formats:

• Follow up on invoice [invoice number]
• Invoice [invoice number] is now 7 days overdue
• Reminder: Payment for invoice [invoice number]

Finding the right tone for payment emails

Stay professional and polite, even when a payment is very late. Assume the best – your customer may have simply forgotten or missed the original invoice. A friendly and helpful tone maintains a good relationship, making it more likely you'll be paid quickly and work together again in the future.

Outstanding invoice email templates

Use these templates to save time. Adjust them to fit your business and situation.

Polite reminder email (1-14 days overdue)

This is a gentle nudge for invoices that are only slightly overdue.

Subject: Follow up on invoice [invoice number]

Hi [customer name],

Hope you're having a great week.

This is a reminder that invoice [invoice number], due on [due date], is overdue. The total amount due is [amount].

You can view the invoice here: [link to invoice]

If you have already paid, thank you. If you have questions, let me know.

Thanks,

[your name]

Formal follow-up email (15-30 days overdue)

If you haven't received a response, your next email can be more direct.

Subject: Invoice [invoice number] is now 15 days overdue

Hi [customer name],

This is a second reminder that invoice [invoice number] is now past due. Payment for [amount] was due on [due date].

Please let us know when we can expect to receive payment. If there's an issue or you have a question about the invoice, please get in touch.

A copy of the invoice is attached for your reference.

Best regards,

[your name]

Final notice email (30+ days overdue)

When an invoice is significantly overdue, be clear about the next steps.

Subject: Final notice: Invoice [invoice number] is 30 days overdue

Hi [customer name],

This is our third and final reminder regarding the outstanding payment for invoice [invoice number]. The amount of [amount] is now 30 days past its due date of [due date].

Please pay promptly to avoid late fees or referral to a debt collection agency, as set out in your payment terms.

Please contact us immediately to arrange payment.

Sincerely,

[your name]

When to send payment reminder emails

Timing is everything. Sending reminders too early can feel pushy, but waiting too long can hurt your cash flow. Setting up a consistent schedule helps you stay on top of payments without having to think about it every time.

Consider a simple timeline like this:

• 1-3 days after the due date: A friendly, gentle reminder.
• 14 days after the due date: A more formal follow-up.
• 30 days after the due date: A final notice that communicates urgency.

Use accounting software to automate reminders and focus on running your business.

How to chase late payments

1. Write a payment request letter or email

Payment request emails are your first step to resolving late payments and maintaining good client relationships.

Why payment requests work:

• Gentle reminder: Many late payments are simply oversights
• Professional tone: Shows you're serious about payment terms
• Documentation: Creates a paper trail for potential escalation

How to structure your payment request:

• Subject line: Include invoice number and "payment reminder"
• Opening: Professional greeting with brief context
• Details: Specific invoice number, due date, and amount owed
• Next steps: Clear payment deadline and preferred method

You do not need to repeat what the payment is for, as these details are on the original invoice.

2. Send an overdue invoice

If the request letter doesn't get a response, the next step is to send an overdue invoice.

An overdue invoice is the original invoice marked as 'overdue' to show urgency. You can attach this stamped outstanding invoice to a follow-up email to serve as a formal reminder to your customer.

Set up an invoice reminder schedule to follow up on late payments and keep customers informed. You can do this manually or use automated invoicing software to send reminders until payment is received.

3. Send a statement of accounts

A statement of accounts combines all unpaid invoices from one client into a single document, making follow-up easier.

Benefits of account statements:

• Simplified admin: Chase multiple invoices with one communication
• Clear overview: Client sees their total outstanding debt
• Professional approach: Shows organised record-keeping

Implementation steps:

• Use accounting software to generate consolidated statements
• Include all invoice numbers, dates, and amounts
• Follow up with a phone call to ensure they received it
• Set a clear payment deadline for all outstanding amounts

4. Make the phone call and prepare to negotiate

Phone calls are often the fastest way to collect overdue payments, as clients respond more quickly than to emails.

Why phone calls work better:

• Immediate response: Clients can't delay or ignore a live conversation
• Personal connection: Maintains relationship while addressing the issue
• Real-time negotiation: Allows for immediate problem-solving

Conversation structure:

1. Opening: Polite greeting and reason for calling
2. Specifics: Mention exact invoice numbers and amounts
3. Question: "When can I expect payment?"
4. Wait: Stay silent to encourage them to commit to a date
5. Confirmation: Don't end the call without a specific payment date

You may need to negotiate payment terms. For small amounts, you could agree to a new payment date but pause further work until payment is made.

Learning which payment negotiation strategy is key. If you prefer, ask your bookkeeper or accountant to handle phone negotiations for you.

5. Charge a late payment fee

Late payment fees encourage on-time payment and cover your admin costs.

How to implement late fees effectively:

• Upfront communication: Include fee structure in your initial payment terms
• Simple calculation: Use flat fees rather than percentages for clarity
• Clear timeline: Specify when fees apply (e.g., after 30 days)

Example fee structure:

• Total due by 1 June: $100
• Total due after 1 June: $110

Best practices:

• Notify clients immediately when fees are applied
• Consider waiving fees for quick payment (within 48 hours)
• Ensure fees are legally enforceable in your jurisdiction

6. Cut them off until outstanding invoices are paid

If a customer does not pay or respond, pause work until you receive payment. This protects your business.

Inform the client that you won't continue any work until all outstanding invoices have been paid in full. This approach helps you protect your business and focus on reliable clients.

7. Hire a debt collector

If you cannot collect payment, a debt collection service can help. This is a common final step after other methods.

Debt collection fees usually range from 5% to 25%. In the UK, you can pass these costs to the debtor.

You can find approved debt collection service providers directly through the Xero App Store.

8. Call in the lawyers

If debt collection does not work, consult a lawyer. The legal process depends on the debtor's business type. You can also consider small claims court to recover unpaid invoices.

Legal action can be complex, so consult a specialist lawyer. Your debt collector may also offer legal support or referrals.

To find out more about legal action, check the disputes register in NZ.

When you still don't receive payment

Unrecoverable invoices are debts you cannot collect. If this happens, you can write off the debt or use prevention strategies.

Your options for persistent non-payment:

• Write off the debt: Remove it from your books and claim tax relief
• Implement prevention strategies: Protect against future bad debts

Write off the unpaid invoice

If you use accrual accounting, you must write off unpaid invoices to claim tax relief on income you did not receive.

To write off an invoice, show your tax authority evidence that it is a bad debt, such as client correspondence. Xero accounting software helps you track, manage, and write off bad debts.

If you use cash accounting, do not include unpaid invoices in your income statements.

Perform credit checks on prospective clients

Check a client's credit score before working with them. A positive score shows they pay bills on time.

Tips for avoiding late payments

Payment prevention strategies help you avoid late payments. Being proactive is easier than chasing overdue invoices.

Key prevention strategies:

• Early tracking: Monitor invoices before they become overdue
• Upfront payments: Secure deposits to reduce financial risk
• Flexible terms: Offer payment plans to accommodate client cash flow
• Automation: Use software to streamline invoicing and reminders

Set time aside to track outstanding invoices

Track outstanding invoices early and send reminders to improve cash flow and client relationships.

Take partial payment upfront

Request a partial payment upfront, such as a deposit or percentage of the fee. This helps you assess client intent and improves your cash flow.

Offer payment plans to clients

Offer payment plans so clients can pay in instalments, such as 25% upfront, 25% halfway, and 50% on completion. If a client has cash flow issues, break payments into manageable amounts, for example, over three months.

Payment plans work well for large invoices or long-term projects. They strengthen client relationships, improve cash flow, and help you get paid on time.

Use accounting software like Xero

Xero accounting software automates sending invoices and reminders, saving you time and helping prevent late payments.

What's the difference between outstanding and past due invoices?

Understanding invoice terminology helps you communicate more effectively about payment issues.

Outstanding invoices are all unpaid bills you've sent, regardless of whether they're overdue or still within the payment period.

Past due invoices are specifically those that haven't been paid by their due date and now require immediate action.

Key difference:

• Outstanding: Includes current and overdue invoices
• Past due: Only overdue invoices that need urgent attention

This distinction matters because past due invoices require escalated collection efforts, while outstanding invoices within terms may just need gentle reminders.

Streamline your invoicing and payment collection

Xero accounting software automates invoice reminders and streamlines payment collection, so you only need to get involved when necessary.

Xero accounting software includes invoice management tools that help you track outstanding invoices and reduce overdue payments.

Try Xero for free today to get started.

FAQs on chasing outstanding invoices

Here are answers to common questions about following up on outstanding invoices.

How do you politely say an invoice is overdue?

Always start with a friendly and professional tone. A simple phrase like, 'This is a friendly reminder that invoice [number] is now past its due date' works well. Assume it was an honest mistake and keep the message helpful, not demanding.

How often should I send payment reminder emails?

Send the first reminder a few days after the due date, a second after two weeks, and a final notice at 30 days. Accounting software can automate this.

What should I do if a client doesn't respond to my emails?

If your emails are being ignored, the next step is a phone call. A direct conversation is harder to ignore and can help you understand the reason for the delay. If you still don't get a response, you may need to consider more serious steps like pausing work or hiring a debt collector.

Can I charge interest on overdue invoices?

You can charge interest or late fees if your payment terms and invoice state this. Check local regulations for limits.