How to Collect Overdue Invoices

Sort out why it's unpaid

Put every overdue invoice into one of five situations before you push, because each needs a different next step. A stern letter to someone who never got the bill costs goodwill and speeds nothing up.

Your trade often tells you where to look first:

• Roofing: On insurance jobs, the last payment can wait on the insurer's depreciation release or a mortgage company; see how to invoice roofing jobs.
• Solar: If a lender pays the final amount, ask which milestone is holding it, such as the final inspection or permission to operate.
• Subcontracted electrical and plumbing work: Whether "the owner hasn't paid us" delays your money depends on your subcontract's payment terms, so read them before you agree to wait.
• Commercial accounts: Property managers, HOAs and fleet customers pay through accounts payable, where a missing PO, work order number, W-9 or insurance certificate can stall an invoice.

Example: A pressure washing company's $1,800 invoice to an HOA is 25 days past due. One call finds the problem: it had no work order number, so accounts payable never routed it for approval. The owner resends it with the number and asks which payment run it will make. The numbers are made up for illustration.

Run the same past-due sequence every time

Once an invoice is past due, send the same calm, factual messages on the same days to every customer. Nothing slips in a busy week, and nothing reads as personal. How to get paid faster covers payment terms and the first reminders. This schedule counts from the due date; for invoices due on receipt, that's the day of the job, so the two schedules line up.

On day 1, find out whether the job has lien rights and when the deadline falls. Don't assume it lands comfortably after day 45.

Messages to adapt:

• Day 1, text: "Hi [name], it's [your name] at [business]. The invoice for [job] was due yesterday and shows $[amount] open. Here's the link to pay from your phone: [link]. If something's holding it up, just reply and tell me."
• Day 21, email with the statement: "Hi [name], attached is a statement for [job] at [address], finished [date]. Invoice [number]: $[total]. Paid: $[paid]. Balance: $[balance], now 21 days past due. Please pay by [date] at [link], or call me at [number] to set up a payment plan."
• Missed promise: "Hi [name], we agreed $[amount] would come in by [date], and I don't see it yet. Can you pay it today at [link]? If something changed, call me by [date] so we can work it out."

Stop the moment money arrives, and pause while you fix a real problem. Redline, which is chat-first field service software, includes payment reminders if you'd rather not run the schedule from memory.

Make the collection call

Call by day 14. A conversation tells you why the bill is unpaid, and you can settle on an amount and a date before you hang up.

Before you dial, open the invoice, the signed estimate or contract, change orders, photos, payment history and any lien deadline. Decide the smallest payment you'll take today and the longest plan you'll accept.

The script:

1. Open: "Hi [name], it's [your name] from [business], calling about the [job] we finished on [date]. Do you have two minutes?"
2. State the facts: "I'm showing $[amount] still open on that invoice. It was due [date]."
3. Ask, then stop talking: "What's holding it up?"
4. Answer what you hear:
   • "I never got it": "Sorry about that. What's the right email or number? I'll send it now. Can you take care of it today?"
   • "Something's wrong with the work": "Tell me what's happening." Book the return visit on the call, then: "Could you pay the part that isn't in question now, and the rest once it's fixed?"
   • "I'm waiting on insurance" (or a lender): "Who's your contact, and what's the claim or loan number? What do they still need from us?"
   • "I can't pay it all right now": "What can you pay today, and when can you do the rest?" Then build a plan (next section).
   • "I'm not paying": "Can you tell me why?" If there's no real reason: "Okay. I'll send a written notice today with the balance and a deadline. I'd rather settle this with you directly than take the next step."
5. Close: "So that's $[amount] by [date], through the link I'm texting you now. Did I get that right?"
6. Confirm in writing within the hour: "Thanks for talking today, [name]. As agreed: $[amount] by [date] at [link]. Balance after that: $[balance]."

Ground rules:

• Call at reasonable hours, and keep the bill between you and the people on the contract: no calls to employers, relatives or neighbors, and no posts online.
• Never threaten a step you don't intend to take or aren't allowed to take.
• Log every call: the date, who you spoke with and what was promised.
• Collect under your own business name. The federal Fair Debt Collection Practices Act governs third-party debt collectors collecting consumer debts ¹, and creditors collecting their own debts are mostly exempt, but a business that collects its own bills under a different name that suggests a third party is collecting can be treated as a debt collector under the law ².
• Ask your state attorney general's office whether your state's debt collection rules cover businesses collecting their own bills; some state laws reach further than the federal one.

Put payment plans in writing

Offer a plan when the customer agrees they owe the money but can't pay it all at once.

• Start with a payment today. A plan with nothing down is just another promise.
• Keep it short. Three or four installments are easier to keep on track than twelve.
• Fix the dates and amounts, each with its own pay link, or charge a card on file the customer authorized in writing.
• Say what a missed payment triggers, such as the full balance coming due. Have a lawyer review your plan form once.
• Skip interest and finance charges unless a lawyer has checked them, because consumer credit rules can apply.
• Check the last payment date against your lien deadline. If the plan runs past it, ask your attorney how to protect your lien rights.

A plan to send by text or email, signed or answered with "I agree":

• Invoice: [number], [job] at [address]
• Balance today: $[balance]
• Paid today: $[amount], received [date]
• Remaining payments: $[amount] on [date], $[amount] on [date] and $[amount] on [date], each at [link]
• Late payment: if any payment is more than [number] days late, the full remaining balance is due at once
• Agreed: [customer name], [date]

Example: An HVAC company replaced a furnace and air conditioner for $12,000, and the $8,000 left after the deposit is 20 days past due. The customer can pay $2,000 today. The plan: $2,000 today, then $2,000 on the 1st of each of the next three months, each with its own pay link, with the rest due at once if a payment runs more than 5 days late. The numbers are made up for illustration.

Late fees and interest: only what was agreed

Add a late fee or interest only if the customer agreed to it before the work, in your payment terms, and only within your state's limits.

• If the signed estimate, contract or terms said nothing about a fee, don't add one now.
• If a fee was agreed, show it as its own line on the statement, with the date it applied.
• Late fee and interest rules vary by state and can differ for consumer and commercial accounts. Have a local attorney check your wording once, or start with your state attorney general's consumer protection office.
• An agreed fee is most useful as something to waive: "If the balance is paid by Friday, I'll take the late fee off."

Example: A plumbing company's signed terms, checked by a local attorney, include a $40 late fee once a balance is 30 days past due. A $1,400 drain line repair reaches day 30, so the statement shows $1,400 plus the $40 fee, $1,440 in all. The owner offers to drop the fee if the $1,400 is paid by Friday, and the customer pays that afternoon. The numbers are made up for illustration.

Send a final notice in writing

If the call doesn't produce a payment or a plan, send a final notice around day 30: a short, factual letter with the balance, a deadline and the exact step you'll take next. Mail it with tracking, email it, and keep copies.

1. Heading: your business name, address and phone; the date; the customer's name and address; "Re: Invoice [number], [job] at [address]."
2. The facts: "We completed [work] at [address] on [date] under the [estimate or contract] you approved on [date]. The total was $[total]. We have received $[paid], leaving $[balance], due on [due date]."
3. Your follow-up: "We contacted you about this balance on [dates and how]." If it applies: "We returned on [date] to [fix], and that work is complete."
4. The deadline: "Please pay $[balance] by [deadline] at [link], by card at [phone], or by check to [address]. If you can't pay in full, call me before then to set up a written payment plan."
5. The next step: "If we don't receive payment or hear from you by [deadline], we intend to [the step you will actually take]."
6. Sign-off: your name, title and direct number.

Attach the invoice, the signed approval and a few photos. Set the deadline about 10 days out so the mail has time to arrive, and name only a step you'll actually take and are entitled to take: no lien threat if your deadline has passed or your work doesn't qualify. No insults, and no copies to anyone else.

Choose the next step

If the deadline passes with no payment and no plan, pick the remedy that fits the balance and your paperwork.

Mechanic's lien

For work that improves real property, such as a roof, a solar array, a furnace, a panel upgrade or a repipe, a mechanic's lien is a legal claim against the property for what you're owed. A recorded lien clouds the title, which gives an owner who wants to sell or refinance a strong reason to settle. It doesn't fit every trade: detailing is work on a car, not real property, and whether a house wash counts depends on your state's statute.

Lien law is set state by state, and its deadlines are strict. Settle these questions with a construction attorney for each state you work in, before a bill goes bad:

1. Is my work covered, and do my lien rights depend on holding a license?
2. Must I send a notice at the start of the job (often called a preliminary notice or notice to owner), and does that change when I work under a general contractor?
3. Do homeowner contracts or owner-occupied homes carry extra requirements?
4. What's my deadline to record a lien, and what event starts the clock?
5. Do I have to send a notice of intent before I record?
6. Once it's recorded, how long do I have to enforce it before it expires?

California shows how tight the clock can be. A subcontractor or material supplier there has 20 days after starting work or delivering materials to serve a preliminary notice, and a late notice loses lien rights for work done more than 20 days before it ^{3 4}. A lien generally has to be recorded within 90 days of completion, a recorded notice of completion shortens that to 60 days for a direct contractor and 30 for a subcontractor or supplier, and the lien claimant then has 90 days from recording to file a foreclosure action ⁴. Other states use different notices and deadlines.

If you work as a subcontractor, ask about start-of-job notices first; how to invoice electrical jobs covers making them routine. And don't sign an unconditional lien waiver for money that hasn't cleared.

Example: A solar installer finishes a system on March 10, with the final $8,000 due at permission to operate. Suppose the installer's attorney says this state allows 90 days from the last day of work to record a lien. When the payment goes past due, the installer marks June 8 as the deadline and May 9 as the decision date. On May 9 the balance is still open, so the attorney has a month to record the lien. The dates are made up for illustration; your state's deadline may be shorter or start from a different event.

Small claims court

Small claims court handles smaller disputes with simpler procedures than a regular lawsuit, which suits a clear, documented unpaid invoice. The dollar limit, filing fees and rules for businesses vary by state, so check your state court system's website before you file.

• Confirm the balance is under your state's limit. If it's over, talk to an attorney before you file.
• Name the party that signed: the homeowner, a landlord's LLC, the HOA.
• Build one folder: the signed estimate or contract, change orders, invoice, photos, texts and emails, call log, payment history, the final notice with proof you sent it, and a one-page timeline.

At the hearing, stick to dates, documents and photos, including your callback records if the customer says the work was bad. Winning gets you a judgment, not the money. If the customer still doesn't pay, enforcing the judgment is a separate step with its own forms and rules in your state.

Collection agencies and attorneys

An agency makes sense when the customer won't engage and you'd rather give up part of the balance than keep chasing it. Ask before you sign:

• How are you paid, and how much of each collected dollar do I keep?
• Are you licensed or registered where my customers live, if those states require it?
• Do you handle consumer accounts, commercial accounts or both?
• Will you report to credit bureaus or sue, and do you need my approval first?
• What if the customer pays me directly after you take the account?
• Which debt collection laws apply to my accounts, including the federal Fair Debt Collection Practices Act, which covers agencies collecting consumer debts, and my state's laws, and how do you comply?

Once you place an account, send every call about it to the agency, and tell them at once if the customer pays you. Use an attorney instead for liens, larger balances, commercial accounts and customers who already have a lawyer; sometimes an attorney's letter is all it takes.

Write it off, then fix the cause

Some balances cost more to collect than they're worth, so run the numbers before you spend more time on one.

Example: A mobile detailer is owed $480 for two cars, now 60 days past due, and the customer won't answer. Suppose small claims filing and service fees in their county come to $100, and the case takes 5 hours the owner could bill at $75 an hour: $475 to win a $480 judgment that still has to be collected. Suppose an agency quotes 40% of what it collects, so a full recovery returns $288 with no more of the owner's time. The owner places the account and will write it off if the agency comes up empty. The numbers are made up for illustration.

Before you write off a balance, ask your CPA how to record it; the tax treatment of an unpaid invoice depends on how you keep your books. If you report income on the cash method, you generally can't take a bad debt deduction for an unpaid fee, because it was never included in your income ⁵. Then close the gap:

• Same terms everywhere: due date, payment methods and any agreed late fee on the estimate, contract and invoice.
• Deposits and progress payments on material-heavy jobs, where your state allows; see how much deposit to ask for.
• A card on file, authorized in writing, for memberships and repeat commercial work.
• A note on the customer's record after any collection problem, so the next job is paid at booking.