Payment Reminder Letter Before a Legal Action

Payment Reminder Letter Before a Legal Action

The very concept of ‘doing business’ only works because there are certain agreements collaborating parties adhere to. Whether you’re a landlord collecting rent payments or a freelancer drafting invoices for the month’s assignments, success requires a degree of trust. 

One of the parties must trust the other to honor their part of the deal because this is the only way to pay for a transaction. Either the supplier provides a service (or resource) and trusts they will receive fair payment for it afterward. Or the client pays upfront and trusts the supplier to provide the service as agreed. 

When things don’t go to plan and payment is not made after a service has already been provided, it can be very worrying. However, there are recommended legal processes for recovering unpaid fees, and reminder letters are part of them. 

What Is a Payment Reminder Letter?

Giving the payer ample opportunity to settle their debt is an essential part of the escalation process. There are many reasons why an individual or organization might fail to pay you on a scheduled date (including simple forgetfulness), so you must send a polite reminder before a final demand.  

Payment reminder letters usually come after more informal reminders designed to inform an individual they’re in arrears. Informal letters assume the individual does not know or has forgotten they must pay. If they are ignored, communications get sterner and may mention the possibility of legal action.  

If you have sent at least one informal reminder and one formal reminder letter, you can talk about the next step. Make it clear that if the payment isn’t made promptly (within two to three days), you will be escalating, and no more reminders will be sent. 

What To Include In Your Payment Reminder Letter

  • The Facts and Figures. Start by stating the basic facts as they were originally agreed upon. This includes the exact nature of the service or resource (rent, copywriting, graphic design, etc.), the agreed payment date, and the exact amount of money owed. If the payment is linked to a reference code or number, include this as well. 
  • Stick to the basic facts. This letter is not the right place to discuss the details of any dispute apart from the missed payment(s). The payer may contact you to discuss how and when they will pay, but whether they will pay is not for questioning. 
  • Your Attempts at Resolution. Next, clearly state the previous attempts to resolve the payment arrears. This part includes calls, emails, or letters to your client to remind them to pay or allow them to pay. By sending multiple polite emails or letters, you prove you have given the individual or organization plenty of chances and done all you can to help. It’s essential because, if the final demand is ignored, you can then take legal steps to recover the debt and use your previous attempts as evidence.  
  • The Next Step. As this is a final demand for payment, use strongly worded terms but write professionally and impersonally. Regardless of your feelings towards the client, the letter may need to serve as a legal document. If your case is escalated, it could be shown in court. Explain that they must settle the debt immediately or face legal actions, which may result in damage to their reputation and/or legal expenses. Include a date after which you will take further action. 

Payment Reminder Letter Before a Legal Action (Format)

{Your Address}

FAO {Client’s Name}

RE: Final Payment Reminder (#Invoice xxx)

Dear {Client’s Name},

I am writing to inform you that you still owe {Amount Owed} to {Your Name/Company} as payment for {Service/Resource} provided on {Date of Provision}.

The details of these services are included in {Invoice/Letter Ref}, a copy of which is attached to this letter.

This amount is now overdue by more than {Time Spent Overdue}. If it is not paid by {Deadline Date}, I will be taking legal action to recover the monies owed. This is your final reminder. Please be aware that incurring legal proceedings might make you liable for litigation fees.

If you wish to discuss this matter directly or request further payment details, please call me urgently on {Your Phone Number}.

Yours Sincerely,

{Your Name}

{Email Address}

{Phone Number}

Sample Final Demand Letter Before Legal Action

401 N Evergreen St

Plymouth, MI, 48170

FAO: Catherine Jenkins (CEO Nails of Michigan)

Final Payment Reminder

Dear Miss Jenkins,

I am writing to inform you that you still owe $478.00 to Freelance Writers R Me as payment for copywriting services provided between the dates of 07.21.2019 and 07.19.2019.

The details of these services are included in Invoice 003 and Invoice 004, copies of which are attached to this letter.

This amount is now overdue by more than ten weeks. If it is not paid by 10.03.2019, I will be taking legal action to recover the monies owed. This is your final reminder. Incurring legal proceedings could make you liable for litigation fees.

If you wish to discuss this matter directly or request further payment details, please call me urgently on 734-692-0382.

Yours Sincerely,

Larry Stack

Final Notice Before Legal Action (Word Template)

The Final Word on Payment Reminder Letters

Once a payment dispute has escalated to numerous formal letters and at least one informal letter, there is a chance legal proceedings may be required. To give your case the best shot at success, maintain a professional tone. Even if you’re frustrated and/or, angry words have been exchanged between yourself and a client; being polite with your payment demands is a way to prove you have behaved reasonably when the individual has not.