Late payments are more than annoying. When you run a small business, proper cash flow is essential to make ends meet.

Also, set up a clear payment policy. For instance:

• 5 days late – you get a warning
• 10 days late – you get a late payment fee
• 20 days late – you lose service
• 30 days late – legal action

Bill Upfront

Invoicing and managing your payments is perhaps the most intimidating part of freelance work. Should you ask for upfront payments? Bill after the work is done? When to send an invoice?

According to a web design agency co-owner, Mat O’Flynn, the only way to mitigate late payments is billing upfront.

Some customers may be wary of sending you money before receiving work, but you can always provide some reassurance by encouraging your prospects to read testimonials or reach out to previous customers.

Invoice Immediately After You’ve Handed In the Work

If you find it hard to quantify the value of a project upfront, Greg Waldorf, CEO of a popular invoicing app, recommends sending an invoice as soon as the job is completed.

According to him, this practice not only helps in preventing late payments. As a small business owner, you might be overwhelmed by tasks and may forget to send the invoice if you postpone it.

Chasing a late payment for an invoice you never sent can only hurt your reputation, so you should at all costs avoid it.

Don’t Shy Away

Admittedly, chasing a late payment is one of the most intimidating tasks. If sending reminding emails wasn’t hard already, some clients might even ignore electronic correspondence.

If this happens, you’ll have to call them.

Be polite and simply remind them about the overdue bill.

In some cases, the clients will pay right away. In others, you might have to arm yourself with patience and call them for days before achieving the result.

Whatever the situation, don’t lose your temper and don’t give up. Call daily and politely remind your clients that they owe you money.

Chasing Late Payments Step-by-Step + Late Payment Email Templates

No matter how hard you try, some clients will just not pay. Here’s a quick guide to preventing and chasing late payments.

Step 1 – Send a payment reminder before the due date

The #1 error you can make is to wait until the due date before reminding your clients they have a bill to pay. Sure, you want to be nice, but you probably also need your money on time. And a way that works in most cases is to simply remind your clients they have an outstanding invoice.

Depending on your payment policy, you should send your payment reminder at least a few days before the due date.

Keep the email short and professional. Use a friendly tone, but don’t deviate from the topic, and also include a link or a copy of the invoice for quick payment.

Here’s an example email you can use:

Subject: Your/Your Business Name: Invoice [invoice reference] Overdue Payment Reminder

Body:

Hi [recipient’s first name],

I hope you are well.

We have yet to receive payment for the pending invoice [invoice reference] for [invoice amount] that was due on [due date]. The invoice is now [number] days overdue and is becoming really problematic for us.

The current invoice amount is now [invoice amount + late payment fees]. I’ve included a link/attachment to the invoice for your review.

If we have not still received payment by [final date], we will have to escalate this invoice to our legal team.

Best regards,
[your first name]

Step 2 – Follow up when the invoice is a few days late

If your client ignored your first message and didn’t pay by the due date, send a follow-up email a couple of days after the due date.

Here’s an example:

Subject: Your/Your Business Name: Invoice [invoice reference] Payment Reminder

Body:

Hi [recipient’s first name],

I hope you are well.

I am writing to notify you that we’ve not yet received the payment for the pending invoice [invoice reference] for [invoice amount] that was due on [due date].

It would be much appreciated if you could let me know when I can expect to receive the payment.

I’ve included a link/attachment to the invoice for your review.

Best regards,
[your first name]

Step 3 – Follow up reminder when payment is late overdue

After you have sent the second email, it will look unprofessional to send another reminder before the invoice is late overdue. You should decide when to send it based on your terms and conditions.

For instance, if you give your clients up to 30 days to pay, this email should be sent around this point. If your client ignores this reminder too, kindly remind them that you’ll take the case to the small claims court.

Here’s an example of late overdue payment reminder:

Subject: Your/Your Business Name: Invoice [invoice reference] Overdue Payment Reminder

Body:

Hi [recipient’s first name],

I hope you are well.

We have yet to receive payment for the pending invoice [invoice reference] for [invoice amount] that was due on [due date]. The invoice is now [number] days overdue and is becoming really problematic for us.

The current invoice amount is now [invoice amount + late payment fees]. I’ve included a link/attachment to the invoice for your review.

If we have not still received payment by [final date], we will have to escalate this invoice to our legal team.

Best regards,
[your first name]

Wrapping It All Up

Implementing a clear payment strategy when setting up your new business is key to getting paid on time. Setting terms and conditions and following up with email reminders is crucial for your business’ success.

So what do you say? How do you handle late payments? Tell us in a comment below and before you go, share this article with your freelance friends.