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Collecting on Overdue Payments

Overdue payments are a chronic problem in professional services, which is why I’ve always advocated being paid in advance, even if it means a small discount. There are times when payments are late because of client cash flow problems (primarily in smaller businesses), or because invoices are lost, or because mistakes are made.

But late payments are usually a product of either overly bureaucratic rules being enforces, or just sloth. When a client says “It takes 30 days to go through our billing cycle,” in an age of computers, it really means that your invoice is sitting on someone’s desk for 29 days. And every client can override a system to generate a check tomorrow. Can you imagine a senior vice president waiting 30 days for a paycheck. I think not.

When a payment is in violation of your terms-say, 30 days-then go back to your buyer on the 31st day. (If your invoice is due “upon receipt” as are mine, I allow a 30-day grace period for processing.)

The letter on the next page is what you should send to your buyer. Don’t argue with accounts payable or some processing clerk. Go back to your buyer.

I’ve provided two types of letters, one a gentle reminder and one a “last resort.” I’ve had occasion to use the first many times, and the second rarely, but they’re both important.

Some hints:

  • Don’t feel guilty or “pushy.” It’s your money and they are violating the contract they signed or agreed to.
  • Follow up weekly until your buyer has a satisfactory answer.
  • If you’re not paid in 60 days, use the second letter.
  • No matter what excuses you’re offered, remember that you can’t use them to pay your mortgage or your kids’ tuition.
  • If you’re to be paid in installments, send an invoice for the installment 30 days ahead of time so that it can be produced on the due date.

Payment Overdue Reminder

I need your help with something relating to our project agreement. Unfortunately, my second fee installment has not been paid, and it’s now more than 30 days overdue. [Note: This can also apply to overdue expense reimbursements-ed.]

Would you please intervene with whomever is responsible in accounts payable to expedite this, and let me know what the status is? I know that you can probably do this in a few minutes, which is better than my making a dozen calls over the course of a few days.

Thanks in advance for your help. As you know, the project is going quite well, we’re meeting all of our interim measures, and this is the only “glitch” to this point. I’ll call you on Friday for our regular update, and perhaps you’ll have some word by that time on this matter as well.

Payment Overdue Reminder II (one-time event)

Thanks for the opportunity to work with you and your people at the seminar. Your comments were very kind, and the audience was terrific!

Could you please help me with one remaining issue? I still haven’t been paid the balance of my fee which, contractually, was due at the time of the presentation. I don’t want to arbitrarily start calling people, so I wonder if you might talk to the appropriate individuals in accounting and let me know when this will be processed?

Thanks in advance for your help. If I don’t hear from you first, I’ll follow-up on the 14th at 9 am by phone. Please call if you need anything else from me.

Payment Overdue Last Resort

Note: Send this by FedEx or by email with request for confirmation of delivery.

We have, unfortunately, a major problem which may significantly impact our project. As I’ve indicated, my current fee has not been paid on its due date and, in fact, is now over 60 days late, Despite assurances of payment from you and people whom you’ve contacted, nothing has happened.

I know that you would not be able to tolerate the same behavior from your own customers, and I’m hoping that you can empathize with my position. But if I don’t receive full payment of that installment by this Friday, I have no alternative but to stop all work on the project as of that morning. If that occurs, our schedule will be severely impacted, since meetings, focus groups, field visits and other activities will all be subject to rescheduling, and they were extremely difficult to put together in this time frame to begin with.

Naturally, I’d like to resolve this in the next couple of days, and I’m confident we can do that. But I must have my payment in hand by Friday morning or I’ll have to call a halt to all work, including the sessions and interviews that are scheduled for that day.

Please call me as soon as possible to let me know what progress you’ve made.

(Note: This article is excerpted from a new book by Alan Weiss, Breaking Through Writer’s Block: Every Letter and Template You’ll Every Need for A Thriving Professional Services Practice, to be published in the fall of 2003.