Xero invoice reminders: set them up so customers pay sooner

Short answer: Xero can email your customers automatically when an invoice is overdue. Turn it on in your invoice settings (look for Invoice reminders, which shows as “Off” until you set it up), tick the option to email customers when an invoice is overdue, then set two or three reminders, for example 1, 7 and 21 days after the due date. Reminders only go out for approved invoices that Xero thinks have been sent, to contacts with an email address, so check those two things if nothing seems to happen.

Menu names move between Xero releases and differ slightly by region. If a label below does not match your screen, search Xero Central for “invoice reminders”.

How to turn them on

1. Open your invoice settings (from the Invoices screen or Sales settings, depending on your version) and find Invoice reminders.
2. Tick Email customers when an invoice is overdue (the wording may differ slightly).
3. Edit the first reminder: choose how many days overdue it goes out, and adjust the subject and message.
4. Use Add reminder to add more, each with its own timing and wording.
5. Decide whether to include a link to the invoice (and its PDF) in the email. Include it: a customer who has to search for the original email is a customer who pays next week.
6. Save. The schedule applies to every approved, sent invoice with an amount still due.

Reminders go to the contact’s primary email address and to any other people on the contact record who are set to be included in emails. Check that the person who actually pays bills (often not the person you deal with) is on that list.

A reminder schedule that works

Most small businesses do well with three reminders that change tone as the invoice gets older:

When	Tone	What it does
1 day overdue	Friendly, assumes it was missed	Catches the invoices that were simply forgotten, which is most of them
7 days overdue	Direct, asks for a payment date	Reaches the customer before a late invoice becomes normal
21 days overdue	Firm, says what happens next	Sets up a phone call; anything still unpaid after this needs a person, not an email

In the UK, the 21-day reminder can name the statutory interest and fixed compensation the customer now owes on a business invoice; the late payment interest calculator gives the exact figure to quote.

Some businesses add a courtesy note a few days before the due date for large invoices. Whether your version of Xero offers a “before due date” option varies, and it is the reminder customers find most useful only when invoices are big or terms are long.

Do not stack reminders every few days. Customers start filtering them, and you lose the one that matters.

What to write

Keep each reminder short and specific. Xero lets you insert placeholders (contact name, invoice number, amount due, due date, the online invoice link) into the message; pick them from the placeholder list rather than typing them, so they fill in correctly.

1 day overdue:

Hi [first name], a quick reminder that invoice [number] for [amount due] was due on [due date]. You can view and pay it here: [online invoice link]. If it is already on its way, thank you, and please ignore this.

7 days overdue:

Hi [first name], invoice [number] for [amount due] is now a week past its due date of [due date]. Could you let me know when we can expect payment? The invoice is here: [online invoice link].

21 days overdue:

Hi [first name], invoice [number] for [amount due] is now three weeks overdue. Please arrange payment this week, or reply to let me know if there is a problem with the invoice. I will give you a call on [day] if it is still outstanding.

The third message promises a call. Make the call.

Why a reminder did not send

Nearly every “reminders are not working” problem is one of these:

• The invoice was never marked as sent. Invoices you approve and then send outside Xero (a downloaded PDF attached to your own email, or a printed copy) stay unsent in Xero’s eyes, so no reminder goes out. Use Mark as sent on them. Repeating invoices set to approve without emailing have the same problem.
• The contact has no email address, or the address on file is someone who left.
• Reminders are turned off for that contact. Most versions let you switch reminders off for an individual customer, which is useful for a client you handle personally, and easy to forget later.
• The invoice is a draft or awaiting approval. Only approved invoices count.
• The reminder rule was added after the invoice passed that point. A “7 days overdue” reminder added today will not go back and send for an invoice that hit 7 days last week.

If a reminder went out and the customer says they never got it, check their spam folder first, then ask for an accounts-payable address to add to the contact.

A worked example: what faster payment is worth

A trade business invoices about $36,000 a month on 14-day terms. Its Aged Receivables report shows customers take 31 days on average to pay, so they are paying 17 days late.

The owner turns on reminders at 1, 7 and 21 days overdue, adds a pay-now option to the online invoice, and starts invoicing on the day the job finishes. Three months later the average is 22 days.

That 9-day improvement means about $10,650 more sits in the bank at any point in time ($36,000 × 12 ÷ 365 ≈ $1,184 of sales a day, × 9 days). Profit has not changed at all. The cash has, permanently, for as long as the habit holds.

You can work out your own figure with the debtor days calculator, and see what extra cash does to how long the business can run with the cash runway calculator. Reminders work from the due date, so the terms you set matter too: invoice payment terms compares 7, 14 and 30 days and “20th of the month following”.

Reminders are one part of getting paid

Reminders handle the forgotten invoices. They do not fix the rest:

• Find who owes you most. The Aged Receivables Summary groups unpaid invoices by customer, so one large late payer stands out. The who owes me money guide covers which customers to chase first, and the aged debtors and creditors guide covers the report settings.
• Send customers on account a monthly statement. Reminders chase one invoice at a time; a statement shows the whole account, which suits customers with several invoices a month or a credit note to account for. See Xero customer statements.
• Keep directors informed. Reminders go to customers, not to the people running the business. A regular aged receivables summary does that job; see aged receivables reports for directors.
• Make paying easy. A pay-now option on the online invoice (card or direct debit through a connected payment service) removes the step where a customer has to key in your bank details. Check the fees first.
• Watch the projection. Late payers make Xero’s 30-day cash projection look better than it will turn out; the short-term cash flow guide shows how to adjust for them.
• If profit looks fine but the bank does not, unpaid invoices are usually the first place the gap hides. The profit but no cash guide walks through the rest.

Common questions

Can I send a reminder manually for one invoice? Xero’s automatic reminders run on the schedule only. To nudge one customer now, resend the invoice from the invoice screen with a short note, or email them the online invoice link yourself.

Do reminders go out for partly paid invoices? They are based on the amount still due, so an invoice that is partly paid and past its due date can still trigger a reminder for the balance.

Will reminders annoy good customers? A customer who pays on time never receives one. The first reminder only goes to people who are already late, and a friendly tone on day one keeps it from feeling like a demand.

Seeing late payers every Monday

ReportPilot reads your Xero figures and sends a short plain-English email every Monday. When customers owe you money past its due date, it says how much in total and across how many invoices, names the biggest overdue customers with the amount and days late, and suggests which one is worth a call first. So you can see whether your reminders are working without opening a report. It asks Xero for read-only access, so it can read invoices but never change or send them, and there is a 14-day free trial with no card.