Guide To Small Business Invoicing

8. Invoice Late Fees: Email Wording Examples

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Invoice Late Fees: Email Wording Examples

Mar 31, 2023 • 9 min read
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      Late payments from clients can create financial difficulties—especially for small businesses. Setting clear payment terms, including a late fee policy, will help assure more on-time invoice payments. 

      Customers have the incentive to pay invoices on time if they know they will be charged a late fee for failure to pay on time. Additionally, customers know exactly when payments are due if they are outlined clearly in established payment terms.

      If you’re considering creating a late fee policy or need to enforce a late fee with your client, here’s a guide on what to consider and the best invoice late fee wording to use in your communications.

      Developing a late fee policy.

      To set expectations with clients— and to avoid having to chase down late payments—small businesses can protect themselves by developing late fee policies. On every invoice you send, you should remind customers of these terms, including the payment due date and any penalties or fees associated with late payments. Having these payment terms clearly documented is important if you run into payment issues.

      Factors to consider when developing a late fee policy.

      A late fee policy should clearly state the payment due date, along with any repercussions for late payment. It should also be fair to clients. 

      It’s best to keep your late fee policy in line with comparable businesses in your industry. By developing a fair but strict policy, clients are discouraged from making late payments, but you’ll still protect your professional relationship with them.

      Finally, ensure your policies don’t go against your state’s usury laws, which regulate how much interest can be charged on a loan. 

      Examples of late fee policies.

      There are numerous ways businesses can instate a late fee policy, whether you charge a flat fee or a percentage of the amount invoiced. 

      Setting a flat fee rate depends on how much you typically charge for services. Some businesses have a scaling system in place that charges a flat fee based on the cost of the service. For example, that scaling system could enforce a $15 monthly fee for invoices under $200, a $25 fee for unpaid invoices between $200 and $500, and a $50 fee for those above $500.

      Generally, businesses that charge a percentage will set a late fee of 1.5%, though this figure is dependent on your specific industry. Companies can charge this fee weekly or monthly. Be sure to check your local laws to see if there are restrictions or caps on the amount you can charge for a late fee.

      Many businesses offer forgiveness on a client’s first late payment, then charge late payment fees moving forward. Doing so demonstrates to clients that you are willing to work with them, while setting boundaries as to how your business expects to be compensated.

      Communicating when a client owes a late fee.

      On average, small businesses will spend 15 days per year chasing unpaid invoices, making it a costly task. Even if you have a great system in place, it doesn’t always work the way you thought it would. When late payments reach three to four weeks (or longer) past the due date, it may be necessary to take certain steps to get your payment.

      Identifying past-due invoices is the first step in the process, and can be a daunting task if you keep your records manually. For the invoices that are about a month late, you can send a friendly follow-up email. Give your client the benefit of the doubt, as it’s possible it slipped their mind or got lost in the shuffle. You can reach out on a personal level, maybe by text or phone call, if you don’t receive a response within five business days. 

      If you don’t receive any communication after a few follow-ups, you will need to force the issue by refusing to do further work until the late payment is made, charging a late fee or interest, elevating the issue to a senior-level staff member, or preparing to send the issue to a collection agency to do the chasing for you. 

      Keep in mind you should always communicate with the client about the next course of action, such as letting them know you are ceasing services, in a straightforward, professional manner.

      Examples of late fee emails.

      The following templates can help you get started in composing a late fee email.

      Initial reminder

      Once your client’s invoice passes the payment deadline, you can send a short, but friendly, reminder email.

      Hi <Name>,

      This is a friendly reminder that Invoice #[invoice number] from [your company name], which was due on [payment due date], is now past due. This invoice was issued on 2024 and sent to you on 2024.

      To make a payment, please follow the instructions outlined on the invoice, which we have attached to this email. 

      As a reminder, our policy for late payments is to charge a fee of [dollar amount] once an invoice is [time period] overdue. If you have any questions or concerns regarding this invoice, please contact us as soon as possible.

      Kind regards,

      [Your Name]

      Follow-up reminder

      If the customer ignores your first email and the payment is over two weeks past due, you may need to be firmer in your communications. Send a follow-up outlining any late fees that may go into effect and the next steps you’ll be taking.

      Hi [Name],

      I am following up regarding Invoice #[invoice number], which remains past due. The payment was due on [due date] and is now overdue by [number] days. 

      Please note that late fees may be applied to your total if we do not receive payment by 2024. We have re-attached the invoice to this email. If you have any questions regarding how to make a payment, please contact us directly so we can assist you.

      Kind regards,

      [Your Name]

      Final notice

      Once a payment is 30 days overdue with no response or action from the client, send a clear final warning email before taking further legal action.

       Hi [Name],

      We are reaching out one final time regarding Invoice #[invoice number], which is now 30 days overdue and has incurred a late fee of [dollar amount]. We require your immediate attention to ensure payment is made.

      We have attached an updated invoice to this email, which includes the late fee described above and in our invoice payment terms. Please confirm your receipt of this email and when we can expect your payment.

      Kind regards,

      [Your Name]

      When to use a collection agency.

      If your efforts to inform customers of their debts have had little success, the next step is to use a collection agency. However, a collection agency shouldn’t be called in to track down those with delinquent accounts unless all other avenues have been exhausted—including resending invoices and reminders and calling the company or client directly.

      Before using a collection agency, ensure that you have provided your clients with an adequate amount of time to pay—standard practice in business is to wait at least 90 days after the invoice due date. Otherwise, you could negatively impact your reputation and relationship with that business. If you do decide to go this route, send the client an email or call them directly to let them know their invoice will be sent to a collection agency for further action.

      Bottom line

      Enforcing late payment terms and a late fee policy ensures customers do not get away with missing a payment. While late payments aren’t always intentional, they can still negatively impact your company’s cash flow. Effectively communicating about late fees and taking action when necessary can ensure a timely payment regardless of the reason for overdue invoices.

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      About the author
      Sean Peek

      Sean Peek has written over 100 B2B-focused articles on various subjects including business technology, marketing and business finance. In addition to researching trends, reviewing products and writing articles that help small business owners, Sean runs a content marketing agency that creates high-quality editorial content for both B2B and B2C businesses.

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