Short-Paid Invoice

When a client doesn’t pay the total amount of an invoice, it can seriously hurt your business finances. Complications could range from an inability to meet your financial obligations to the need to take out high-interest loans. The larger the figure on the invoices to be paid, the higher the risk. So, what is a short paid invoice, and what can you do about it?

What Is a Short Paid Invoice?

As the name implies, it refers to an invoice for which the client has paid less than the total amount. For example, you have recently onboarded a new retail client that promises to order $50,000 worth of goods. The company makes good on its promise, and you submit a net-30 invoice for the $50,000. On the day of the payment’s deadline, you receive a check from the customer for $40,000. That invoice has now become short-paid.

Why Would Clients Short Pay Your Invoice?

Clients could underpay an invoice for a wide range of reasons. It could be an honest mistake, such as the client forgetting to include the taxes in their payment. In other cases, it might be intentional on the client’s part. For example, if the client experiences financial difficulties, they may only be able to make a partial payment. In some cases, clients may use short payments as a negotiating tactic to get you to agree to a lower price.

Why Should You Send a Short Paid Invoice Letter?

Ideally, you should send a formal letter to the client advising them of the error and requesting that they remit the outstanding balance. This approach has a few key benefits. First, it notifies the client that you saw the discrepancy and expect to receive full payment. Second, it provides a written record of your request, which could be helpful if you need to take action against the client later. Finally, it sets a professional tone and avoids any potential misunderstandings.

Example of a Short Paid Invoice Email Template

Subject: Short-Paid Invoice Notice

Hello {client name},

We regret to inform you that your recent payment of ${amount paid} for invoice #{invoice number} falls short of the total amount due of ${total amount due}. Please remit the outstanding balance of ${outstanding balance} as soon as possible.

If you have any questions, please do not hesitate to contact us at {your contact information}.

Thank you for your attention to this matter.

Sincerely,

{Your name}

You can easily customize this template to fit your specific needs. For example, if this is a recurring problem with a client, you might want to add additional information addressing that. While you can send this via email, some companies also send a physical copy. You may also wish to consult an attorney to draft a more formal letter.

What Are Some Best Practices for Sending a Short Paid Invoice Notice?

Handling short-paid invoices requires patience and human intelligence. However, you can also leverage technology to streamline the process. Consider the following best practices:

Write several notices you can send out at different intervals to encourage payment, similar to your dunning notices for late payments.
Automate the process of sending out notices when balances paid fall below amounts due.
Monitor your clients’ payment patterns and send out early warnings when they start to fall behind.
Hire an attorney to help you determine your rights when seeking payments from different types of customers.
Determine whether you will have penalties for short payments and include that in your letter.

Gaviti streamlines the accounts receivable process for our clients. Automating communications can save your team thousands of labor hours, especially regarding dunning and underpayment notices. Book a demo to see Gaviti in action.