Contractor late payment letters - free templates

As the former chairman of the Federation of Small Businesses, John Walker, once admitted – “There are always going to be companies that pay late.”

Well, if that’s the case, contractors should arm themselves against a constant foe, writes Adam Home of Safe Collections, a debt recovery and credit reporting agency that specialises in helping freelancers, contractors and other small businesses.

Seven days overdue

One of the first volleys to launch against your late-paying agent or client is when your invoice turns seven days overdue. Note, we only say ‘one of the first,’ because the very first step you should take to maximise your chances of prompt payment should actually be taken as early as one week after you’ve sent your invoice!

But regardless, seven days beyond the payment date have passed. You now send a ‘Reminder of Payment’ letter or email, (see Letter A - ‘Reminder of Payment,’ below).

Fourteen days overdue

As a contractor business unpaid at fourteen days after the due date, another letter – stronger in tone – should be sent by you to the agent or client (See Letter B, below). This ‘Second Reminder of Payment’ letter or email should explicitly, but politely, inform the client that they may incur additional charges owing to their original non-payment.

Still not paid?

Lastly, but potentially most importantly, contractors also need to have a ‘Final Demand’ letter to hand (Letter ‘C’). Stronger in tone than the two previous letters, this document features three sets of numbers near the top, so they are prominent in appearance. It’s your final stab, and the reader – the client’s or agent’s accounts payable staff - should feel it.

Contractors, remember: The government agrees with you that paying you late is not fair and should be punished. To this end, late payment legislation was introduced in 1998; it was supplemented in 2002 and toughened up in March 2013 in the shape of the ‘The Late Payment of Commercial Debts Regulations 2013.’So for any B2B invoice raised after March 16th 2013, this newest legislation applies. It allows for you (the contractor, or unpaid party) to recover any extra collection costs that you incur! (For invoices raised prior to the 16th of March 2013, the previous legislation still applies).

The Fear

For some contractors, letters or emails demanding payment take courage to compose, let alone send. But as long as you’re polite and professional, don’t be afraid to pursue the payment for your services. If approached in a sensible fashion, having credit control procedures in place will only reinforce the idea that your business operates effectively in all areas. Moreover, as the FSB’s Mr Walker has reminded his members, “In the current economic climate, every penny counts”. And as we like to urge contractors to tell themselves, “A sale is not a sale until the money is in the bank. I shall ensure that it arrives there.”

A. Reminder of Payment Letter

Dear Sirs,

Outstanding Account Value - £ (Insert sum)

The above sum was due for payment on XX/XX/XX but as at today's date no payment has been received.

Should your company have any legitimate reason for non-payment please contact us within the next three days so we can fully investigate any issue.

Should no query exist please be aware that the agreed contractual payment terms are strictly XX days and we make no provision for extended credit terms in our agreement.

Regards

………………………………………………………………………………………………

End of letter

Download Reminder of Payment Letter (A) [Word doc]
 

B. Second Reminder of Payment  Letter

Dear Sirs,

Outstanding Account Value - £ (Insert sum)

As at today's date, we have yet to receive payment of the outstanding amount, which is now considerably beyond the agreed contractual payment terms. 

Our company has not yet levied any late payment or interest charges under the “Late Payment of Commercial Debt (Regulations) 2013” but we reserve our right to do so should your company fail to make immediate payment of the overdue amount.

We trust this will not be necessary and look forward to receiving payment of the overdue sum by return.

Regards

………………………………………………………………………………………………

End of letter

Download Second Reminder of Payment Letter (B) [Word doc]
 

C. Final Demand Letter

Dear Sirs,

Final Demand

Outstanding Account - £ (Insert sum)

Late Payment Costs - £ (Insert sum)

Late Payment Interest - £ (Insert sum)

Total Outstanding - £ (Insert sum)

Despite previous reminders we are disappointed to note that the above amount remains outstanding.

As your company is now in breach of the agreed contractual payment terms we have reluctantly added further costs and interest in line with “Late Payment of Commercial Debt (Regulations) 2013”.

It is now imperative that this amount is settled in full, including late payment costs and interest charges within the next seventy-two hours.  Failure to settle this now extremely overdue account will leave our organisation with little option but to pass this account to our chosen debt recovery agency, [insert name].

Please note:  If debt collection agency [insert name] is instructed to collect this overdue amount, your company will be liable for any additional debt collection costs incurred by us in their engagement.

We would therefore respectfully suggest that you treat this matter with the urgency it deserves and remit the full balance due plus associated late payment penalties immediately.

Regards

………………………………………………………………………………………………

End of letter

Download Final Demand Letter (C) [Word doc]

Tuesday 7th June 2016