Final letter chasing an overdue payment

What’s a final letter chasing an overdue payment and when should you use it?

This is the final complaint letter in our credit control process where one business owes another business money.

It is the third template letter in our series.

It is not prepared as a letter before action (the formal letter that initiates a formal legal process), which would normally follow after this stage.

You can use this template letter to chase a debt owed to you by another business, but it would also be fine to use it where a consumer owes you money.

However, we strongly encourage you to only send this letter once you’ve sent our initial letter of complaint about money owed to you by another business (or consumer), and subsequently, our second letter of complaint about money owed.

What else you might need

Taking a late payer to court isn’t cheap and – especially if you’re a freelancer or very small business – it can lose you business by taking up precious time that you should be allocating to earning money on other jobs.

Legal action should only really be taken in the following situations:

• You’ve sent a communication to your debtor (called a ‘letter before action’) informing them that you will start a legal action against them unless the payment is made immediately (and this letter was ignored by the debtor).
• You’ve checked that the debtor hasn’t stopped trading and does, in fact, have assets
• The amount owed far outweighs the cost of legal fees and potential lost business
• You’ve tried, or strongly considered trying, an alternative dispute resolution (a third-party arbitrator or mediator, for example) if your charges are disputed
• You’ve looked into transferring the balance to a debt collection agency, who may be able to recover the debt for you in return for a reasonable fee. Do note, however, that some agencies charge a percentage of recoveries, which can often work out more expensive than a solicitor sending a letter before action on your behalf.

To discover more about managing debt within your small business, take a look at our step by step guide to managing debts