Chapter 5 of 8

Sending payment requests for overdue invoices


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Small business guides > Invoicing Survival Guide > Sending payment requests for overdue invoices

Sending payment requests for overdue invoices

Following up late payments isn’t a job anyone likes doing. It often gets put off in favour of easier or more enjoyable tasks. Then you realise there’s a lot owing to you that you could really do with in your bank account.

unpaid invoices

When to follow up unpaid invoices

If an unpaid invoice goes past the due date, don’t wait long before you follow up with the customer to chase payment. You’ve done the work and it’s your money.

If you’re running an overdraft or have business loans, you’ll know that not having the money in the bank is costing you. And even if you’ve got cash to call on, money that’s late coming in is costing you the opportunity to do something else with it or to invest it.

Keep an eye on your accounts receivable (the list of invoices that aren’t paid) and tackle the oldest debts first. Aim to keep reducing the number of unpaid invoices and the total amount owing to you. In an ideal world everyone would pay on time, but until that day happens, get ready to chase up those late payers.  

overdue invoices

Ways to chase overdue invoices

If the invoice goes past the due date – and sometimes almost half do* – you’ll need to prompt your customer. That often feels uncomfortable and it’s easy to put it off to another day. But you’re not asking for a favour: the customer has accepted something from you. Now it’s time for them to keep their side of the bargain.

So be polite, but act quickly if you don’t want bad habits to form. The longer you let an invoice go unpaid, the lower the chances that it ever will be.

* Xero invoices that were due and fully paid between July 2016 and January 2018

Pick up the phone

A phone call is powerful – awkward to make, but effective. It’s awkward for the customer too and that’s why it works. You don’t need to say much. Just be polite and friendly and tell them what invoice is late. Then let them do the talking. 

They may have a perfectly reasonable explanation – whether they missed seeing the invoice come in or there’s been illness or a family bereavement that’s disrupted their routine. We’re all human, and this is where you can ask what would help them or suggest a solution.

If the client disputes some aspect of the invoice, stay calm and listen to what they have to say. Ask them to pay the rest of the invoice while you sort out the problem with them.

If you find yourself making a second or third phone call, stay polite but firm and outline what they need to do and the consequences of non-payment.

Always keep notes of your phone calls so that you have a reminder of the commitments your customer has made. And get into the habit of scheduling follow-ups in your diary, so that you check for payment and phone again if necessary.

Send an overdue payment reminder email

The least daunting way to chase payment is to send an email. Clever invoicing software has automated email reminders built in. Here’s a sample payment reminder email.

email reminder for late payment of invoices

Send a statement

Sending a statement is another, less personal way, to email a reminder. A statement differs from an invoice in that it shows all the customer’s unpaid invoices, or summarises all their invoices and payments, between two dates. Statements are most useful when a customer has more than one invoice awaiting payment.

Use an online system

You can remove yourself from the equation almost entirely by using online invoicing. This will make it simple to keep track of your invoices and watch your bank deposits for matching payments. If an invoice remains unpaid after its due date, the software automatically emails a reminder to the customer. So you don’t need to get involved unless the reminders go ignored for too long.


Handy tips for your business
Use invoice reminders

Watch how reminders work

Get paid faster

How online invoicing works

Invoice tips and tricks

Guides for small business


warning for late invoice payments

What to do when people just don’t pay

Really reluctant payers are a fact of life, so what can do do when you encounter these sticky situations?

Agree on a payment plan

If your customer is struggling with cash flow for whatever reason, you could suggest they make part payments staggered over several weeks or months. Part payments make reconciliation a bit harder for you, but it’s worth it to get paid eventually. Remember to ask the customer to quote the invoice number in each part payment they make, so it’s easy to keep track.

Last resort steps to recover your money

If nothing else has worked, your options include:

  • start charging late fees and interest if this was in your agreement with the customer
  • stop supplying goods or services till they pay
  • repossess the products supplied if this was in your agreement with the customer
  • use a debt collection agency to recover the debt
  • sell the debt to a debt collection agency
  • send a letter before action warning that you intend to take legal action
  • issue legal proceedings to recover the debt plus costs
  • write off the amount owing as a bad debt

If you need to take these drastic steps, then your relationship with the customer has really broken down. It’s likely they’ll react by taking their business elsewhere, so don’t be surprised when it happens.

Send a warning letter

A letter before action formally requests the payment of a debt to your business and sets out what will happen if the payment isn’t made within a specified timeframe. It includes details of any interest payable and the threat of legal proceedings. The letter can be highly effective in recovering debts without having to take the customer to court. A letter which has been prepared by a lawyer will not only cover all the required elements, it will also show that you’re serious about collecting the debt.

Write off the past due invoice as a bad debt

Most invoices will go from being unpaid to paid. But those that are never paid are written off as a bad debt, which involves some bookkeeping by you or your accounting professional.

Cristina Garza

"With past due invoices, we use Xero to send out automated invoice reminders. We set the tone to start light and become firmer as the invoices age. We also call the client – the answer may be as simple as changing the contact in our Xero record."

Cristina Garza, Accountingprose, Xero gold partner


Chapter 6: Make invoicing better

Check out our tips for making the invoicing process simpler so it takes up less of your valuable time and the money flows in faster. And see the additional benefits that online invoicing brings.

Read chapter 6