How to Collect Past Due Invoices

To collect past due invoices, act quickly, communicate clearly, and stay professional throughout the process. Send a friendly reminder as soon as a payment is late, as many overdue invoices are simply the result of an oversight. If that doesn’t work, follow up with a more direct message that outlines the payment details, any applicable late fees, and a clear deadline. Escalate step by step, moving from reminders to phone calls, and eventually to formal collection notices if necessary. Each stage should balance firmness with professionalism, ensuring you protect your cash flow without damaging valuable client relationships.

Double-Check the Invoice

Before reaching out, make sure the invoice itself isn’t the problem. Even a small error can give the client a reason to delay. Review:

• Invoice number (unique and sequential).
• Billing details (correct company name, address, and contact person).
• Services or products listed (clear descriptions, matching what was agreed).
• Payment terms (Net 15, Net 30, or custom terms).
• Total amount (check taxes, discounts, and fees are applied correctly).

Example: If you billed “Consulting Services – 12 hours” but your contract says 10 hours, the client may dispute the extra 2 hours. Fixing this upfront saves time and strengthens your credibility when you follow up.

Send a Friendly Reminder

A lot of overdue invoices are simply forgotten. Your first outreach should be polite and non-confrontational.

Example email template:

Subject: Friendly Reminder: Invoice #123 Past Due

Hi [Client Name],
I hope this message finds you well. I wanted to remind you that Invoice #123 for $1,200, due on [Date], is now past due. If you’ve already processed payment, please disregard this message. Otherwise, we’d appreciate it if you could let us know when we can expect it.

Thank you for your attention to this matter.
Best,
[Your Name]

Tip: Send reminders at intervals, 1 day after due date, 7 days after, 14 days after, before escalating further.

Offer Flexible Payment Options

Sometimes, the issue isn’t unwillingness but the inability to pay in full. Offering flexibility shows you’re willing to work with the client.

Options to consider:

• Installments: Break down a $5,000 invoice into 5 payments of $1,000.
• Different payment methods: Credit card, ACH, digital wallets.
• Extended due dates: Add an extra 15–30 days if it helps them.

Example: A marketing agency working with a startup offers to split a $2,500 invoice into 3 monthly payments. The client pays promptly because the burden feels manageable.

Add Late Fees or Interest

Late fees encourage clients to prioritize your invoice. Always include this in your payment terms upfront, otherwise, you may face pushback.

Common approaches:

• Flat fee (e.g., $25 per late invoice).
• Percentage-based (e.g., 1.5% of outstanding balance per month).
• A combination of both.

Example clause: “Payments not received within 30 days of the due date will incur a late fee of 2% per month.”

Tip: Enforce this consistently but fairly, waive it once for a long-term client, but not repeatedly.

Escalate Communication

If reminders and flexibility don’t work, it’s time to step up.

Escalation steps:

1. Second reminder email with “Urgent” subject line.
2. Phone call to the client or their accounts payable department.
3. Formal letter (physical or PDF) outlining the overdue status and consequences.

Why it works: Clients are less likely to ignore a phone call or a letter than an email. It signals you’re serious.

Example: “Per our agreement, Invoice #456 remains unpaid. If payment is not received by [Date], we may have to suspend services and initiate further collection procedures.”

Put Services on Hold

Continuing to provide services to a non-paying client drains resources. Make it clear in your contracts that you may pause work until invoices are settled.

Example: A general contractor is managing a home renovation project worth $50,000. The payment schedule is split into three milestones:

• 30% upfront deposit ($15,000)
• 40% after framing and electrical work ($20,000)
• 30% upon project completion ($15,000)

The client pays the deposit but delays the second milestone payment by three weeks, even though the framing is finished. Instead of continuing to the next phase (plumbing and drywall), the contractor pauses all work until the $20,000 payment is received.

This protects the contractor from completing additional work without assurance of payment and makes it clear to the client that progress depends on staying current with invoices.

Use a Collection Agency or Legal Action

If the invoice is significantly overdue and previous steps have failed, you may need outside help.

Options:

• Collection agency: They pursue payment on your behalf, usually taking 20–40% of the recovered amount.
• Small claims court: For smaller amounts (rules vary by jurisdiction).
• Legal action: For larger sums or repeated offenders.

Example: A design agency has a client who owes $15,000 and has ignored all reminders. The agency hands the debt over to a collections firm, which recovers $12,000 after fees. Not ideal, but better than nothing.

Warning: This step can permanently damage the relationship, so use it only when the client shows no willingness to cooperate.