Free Guide to Letter Regarding Payment Terms

In business, you must have clear and consistent payment terms that you communicate effectively to your customers. This ensures that both parties have a mutual understanding of when payment is due and the consequences of late payment.

Writing a letter to customer regarding payment terms can be a delicate matter. It is a necessary step to maintain a healthy business relationship.

In this guide, we will walk you through the steps to create a well-crafted letter that effectively communicates your payment terms.

What Is a Letter to Customer Regarding Payment Terms?

A letter to a customer regarding payment terms is a formal communication sent by a business to a customer. It is to communicate the payment terms for goods or services provided by the company.

The letter may remind the customer of an upcoming payment deadline or an offer of a payment plan. This is to help the customer make payments over some time.

Importance of Letter to Customer Regarding Payment Terms

A letter to a customer regarding payment terms is an important communication that can significantly affect the business-customer relationship.

Here are some of the key reasons why this type of letter is so important:


A letter regarding payment terms provides clarity for the customer. It ensures they understand the payment schedule and any fees or penalties that may apply if they do not make payments on time. This can help to avoid misunderstandings or disputes between the business and the customer.


Sending a letter regarding payment terms on time helps ensure the customer is aware of the payment schedule. They can make arrangements to meet their obligations. This can help ensure that payments are made on time, which is essential for the business’s financial health.


 A letter regarding payment terms demonstrates professionalism on the part of the business. It shows that they take their financial obligations seriously and are committed to maintaining a positive customer relationship.

Legal Protection

In some cases, a letter regarding payment terms may be necessary to protect the business’s legal rights. For example, if the customer fails to make payments, you can use the letter as evidence. This will show the payment terms and any penalties that may apply.

Customer Retention

By communicating payment terms clearly and professionally, businesses can help to retain customers and build trust in the relationship. Customers who feel they are being treated fairly and respectfully are likelier to continue doing business with the company.

person wearing yellow sweater writing with white pen in notebook
person wearing yellow sweater writing with white pen in notebook

Steps to an Effective Letter Regarding Payment Terms

Step 1: Know Your Payment Terms

Before drafting a letter to your customer regarding payment terms, you must be clear about the payment terms you offer. Your payment terms should be understandable and communicated on your invoices and any other payment-related documents.

Standard payment terms include:

Net Payment Terms

This means payment is due within a few days after the invoice date. For example, Net 30 means payment is due 30 days after the invoice date.

Early Payment Discount

 This is a discount offered to customers who pay their invoices early. For example, a 2% discount for payment received within ten days of the invoice date.

Late Payment Penalties

This fee is charged to customers who do not pay their invoices within the agreed payment terms. For example, a 1.5% fee is charged monthly on overdue balances.

Payment in Advance

This means payment must be made before goods or services are provided.

Payment on Delivery

This means payment is due immediately upon receipt of goods or completion of services.

Determining which payment terms work best for your business and communicating them to your customers is essential.

Step 2: Determine the Purpose of the Letter

Once you have established your payment terms, the next step is to determine the letter’s purpose. The purpose of your letter will determine the tone and language used in your letter. Common goals for a letter regarding payment terms include the following:

A Reminder of Payment Due

This type of letter reminds a customer that payment is due or past due.

Request for Early Payment

This type of letter requests early payment in exchange for a discount.

Notification of Late Payment Penalty

This type of letter is used to notify a customer of a late payment penalty.

Payment Plan Offer

This type of letter is used to offer a payment plan for customers who cannot pay the total amount due.

Request for Payment Plan

This type of letter is used to request a payment plan from a customer who cannot pay the full amount due.

Step 3: Draft the Letter

Here is a step-by-step guide on how to draft your letter:

Begin With a Friendly Greeting

Start your letter with a friendly greeting such as “Dear Valued Customer” or “Hello.”

State the Purpose of the Letter

Clearly state the purpose of the letter in the first paragraph. For example, “I am writing to remind you that your payment of $X is due on X date.”

Provide the Details

In the following paragraph(s), provide the specific details related to the letter’s purpose. For example, if you remind the customer of a late payment penalty, give the particular penalty amount. Show the date it will be applied.

Offer a Solution

If the purpose of the letter is to offer or request a payment plan, provide the plan details. Show the customer how it will work. Be clear about the terms of the payment plan. This includes the amount of each payment, the due dates, and any interest or fees that will be applied.

End With a Call to Action

End your letter with a clear call to action, such as “Please remit payment by X date”.

Provide Contact Information

Provide your contact information at the end of the letter, including your name, phone number, and email address. This will allow the customer to contact you with questions or concerns.

Close With a Friendly Statement

Close your letter with a friendly statement such as “Thank you for your continued business.” Or you can use “We value your business and look forward to working with you.”

Step 4: Review and Revise

Before sending the letter, reviewing and revising it for clarity, tone, and accuracy is essential. You may want someone else to read the letter to ensure it is clear and professional. Check for any grammatical or spelling errors, and ensure all details are accurate.

Step 5: Send the Letter

Once you have reviewed and revised the letter, it is time to send it to your customer. You can send the letter by email or mail, depending on your preference and the customer’s contact information. If you are sending the letter by email, be sure to include a clear subject line stating the email’s purpose.

Step 6: Follow Up

After sending the letter, following up with the customer is essential to ensure they received it. Be ready to answer any questions they may have. If the letter’s purpose was to remind the customer of a payment due date, you might want to follow up.

Do it a few days before the due date to ensure they have sent the payment. If the letter’s purpose was to offer a payment plan, you should follow up after the due date. This is to ensure they are sticking to the payment plan.

Sample of a Letter to Customer Regarding Payment Terms

Dear [Customer Name],

I am writing to discuss the payment terms for the invoice you received on [date]. The total amount due is [amount], with a date of [due date]. Please note that a late fee of [fee amount] will be applied unless payment is received by the due date.

We understand that unexpected financial challenges can arise and are willing to work with you to find a solution. If you cannot make the full payment by the due date, we would be happy to set up a payment plan. This will allow you to make smaller, more manageable payments over time.

Under the proposed payment plan, you would be required to make [number of payments] payments of [amount] each, with the first payment due on [date]. Please note that a [interest rate]% interest charge will be applied to each payment under the plan.

We believe that this payment plan is a fair and reasonable solution. It will allow you to meet your obligations while avoiding additional fees and penalties. If you are interested in the payment plan, please let us know as soon as possible so that we can make the necessary arrangements.

If you have any questions or concerns about the payment terms or the proposed payment plan, Kindly reach out. Please do not hesitate to contact me at [phone number] or [email address]. We appreciate your business and look forward to resolving this matter promptly and mutually beneficially.


[Your Name]


[Your Contact Information]

Best Ways to Send a Letter to Customer Regarding Payment Terms

When sending a letter to a customer regarding payment terms, several options are available to businesses. The best way to send the letter will depend on some factors. It could be the urgency of the communication, the customer’s preferences, and the business relationship’s nature. Here are some of the best ways to send a letter to a customer regarding payment terms:


Email is a fast and convenient way to communicate with customers, allowing for easy tracking of communication history. It is best for less formal communication, such as reminders or updates on payment terms. However, it is important to ensure that you secure the email and protect the customer’s personal information.

Certified Mail

Certified mail provides proof of delivery and requires a signature. This can be useful for more formal communication or a dispute over payment. This option is more secure than email but may be more costly and take longer to arrive.


While less commonly used than email or mail, fax is still an option for sending letters to customers regarding payment terms. It provides a fast and reliable method of communication but may not be as secure as email or mail.

In-Person Delivery

For urgent or sensitive matters, in-person delivery may be the best option. This allows for immediate communication and the opportunity to address any questions or concerns the customer may have.


In conclusion, a letter to a customer regarding payment terms is a crucial communication that can significantly impact your business-customer relationship.

By communicating payment terms clearly and professionally, you can avoid misunderstandings and disputes, protect your legal rights, and maintain positive relationships with your customers.

We have discussed the key components of this type of letter, the importance of sending it promptly and professionally. Use the best ways to ensure your customers receive and understand it.

By following these guidelines, you can ensure that your payment terms are clear, fair, and mutually beneficial and that your business continues to thrive.

Abir is a data analyst and researcher. Among her interests are artificial intelligence, machine learning, and natural language processing. As a humanitarian and educator, she actively supports women in tech and promotes diversity.

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