What Is an Overdue Invoice? Definitions, Risks, and Next Steps

An overdue invoice is one that hasn't been paid in full by its due date. From the day after the due date, the unpaid amount is past due, and it stays overdue until the customer pays it. To deal with one, check that the client received the invoice, send a reminder, follow up on a set schedule, and keep a record of every contact. Whether you can add late fees or take further action depends on your contract and the rules where you work.

How an Invoice Becomes Overdue

The due date comes from your payment terms. OpenStax's Principles of Finance 2e (§19.4) describes credit terms as "how long do we give customers to pay their bills". If your terms are net 30, the invoice is due 30 days after the invoice date, and it's overdue if it's still unpaid after that.

An unpaid invoice is part of your accounts receivable. OpenStax's Principles of Accounting chapter 9 key terms define accounts receivable as "outstanding customer debt on a credit sale, typically receivable within a short time period". For setting terms, see invoice payment terms explained.

Tracking How Long an Invoice Has Been Unpaid

OpenStax explains how businesses track this with an accounts receivable aging schedule: "To prepare the aging schedule, a classifying of customer account balances is performed with age as the sorting attribute." It defines the age of a receivable this way: "The age of a receivable is the number of days that have transpired since the credit sale was made (the date of the invoice)."

Aging schedules group unpaid balances into categories by how far past due they are, such as 0 to 30 days past due and 31 to 60 days past due. Reviewing them regularly shows which invoices to follow up first. See what is accounts receivable and accounts receivable turnover.

Worked Example: One Invoice, Checked on April 15

These are sample figures for a fictional invoice.

• Invoice #1088: $2,400.00, dated March 1, terms net 30
• Due date: March 1 + 30 days = March 31
• Checked on April 15: still unpaid
• Age of the receivable: March 1 to April 15 = 45 days since the invoice date
• Days past due: March 31 to April 15 = 15 days
• Aging category: 0 to 30 days past due

If the client then pays $1,000.00, the invoice is still overdue for the remaining $2,400.00 − $1,000.00 = $1,400.00. See how to handle partial payments.

What to Do When an Invoice Is Overdue

1. Check the basics. Confirm the client received the invoice, that the amount and the purchase order or reference number are right, and that it went to the person who pays.
2. Send a short reminder. Mention the invoice number, amount and due date, and include a way to pay.
3. Follow up on a schedule. Set dates for the next reminders and a phone call, and stick to them.
4. Keep a record. Note each reminder, call and reply, and any payment promised.
5. Agree on a plan if needed. If the client can't pay in full, agree on a payment plan in writing.
6. Decide on next steps. If the invoice stays unpaid, decide whether to pause further work, use a collection agency or take legal action. The options and rules depend on where you work, so check local rules and ask a lawyer where needed.

For wording and timing, see how to follow up on unpaid invoices.

Late Fees and Interest

Whether you can charge a late fee or interest on an overdue invoice, and how much, depends on your contract and the law where you work. Check local rules, and put any late fee in your terms before you send the invoice. See how to add late fees to invoices and the late fee calculator.

Overdue Invoices in Billed

Billed's invoice software page says: "Set a due date on each invoice so your client knows when to pay. Invoice reports show which invoices are paid, partially paid or past due, and you can see who owes you money and send them a payment reminder. Payment reminders can be customized."

Billed's home page says you can "Create Recurring Invoices, setup scheduled payments and send automated payment reminders."

Related Guides

• How to follow up on unpaid invoices
• Invoice payment terms explained
• How to add late fees to invoices
• How to handle partial payments
• Late payment statistics
• Cash flow statistics

FAQ

When is an invoice considered overdue?

When it hasn't been paid in full by its due date. In the sample on this page, an invoice dated March 1 on net 30 terms is due March 31, so on April 15 it's 15 days past due.

How do I track overdue invoices?

Keep an aging list of unpaid invoices, grouped by the number of days past due, and review it regularly. OpenStax describes this as an accounts receivable aging schedule, which sorts customer balances by age.

Can I charge a late fee on an overdue invoice?

It depends on your contract and the law where you work, so check local rules. Put any late fee in your payment terms before you send the invoice.

What can I do if a client still won't pay?

Keep following up and record every contact, offer a written payment plan if that helps, and then decide whether to pause work, use a collection agency or take legal action. The rules depend on where you work, so ask a lawyer where needed.