When you are staring at unpaid invoices, what to do next depends on why the customer hasn’t paid, and that is the question most owners skip before sending a sharper email. Below is the escalation plan an experienced AR manager would follow, from checking your own paperwork to deciding, with a lawyer, whether formal action makes sense.
Unpaid invoices are a small business problem, not just yours
If it feels like everyone pays late now, the data backs you up. The QuickBooks Small Business Late Payments Report 2026 found that 59% of US small businesses have invoices more than 30 days overdue, up from 47% a year earlier, and the average amount owed is $17.7K. It shows up in the bank account: 51% of businesses with overdue invoices say cash flow is a problem, compared with 36% of those without.
The better news is that many unpaid B2B invoices are not lost. They are stuck behind a missing PO, a wrong email address, an unanswered question or a slow approval chain. A calm, structured escalation clears a lot of them before anything formal is needed.
How to collect unpaid invoices from a business: 7 steps
Work through these in order. Each step either gets you paid or tells you exactly why you are not being paid, which is what you need for the next one.
1. Check your own invoice and paperwork first
Before you chase anyone, make sure the invoice isn’t stuck because of something on your side. Check that:
- It is addressed to the right legal entity and billing address.
- It shows the customer’s PO number or any reference they require.
- The amount matches the quote, contract or signed change order.
- Proof of delivery, a timesheet or a sign-off is attached where needed.
- It was sent where the customer asked: an AP inbox or a supplier portal, not just your project contact.
- Your W-9 (in the US) and bank details are on file with them.
In construction, also check the pay application format, retainage and any lien waiver the general contractor needs before releasing payment. Our construction AR page covers the paperwork that most often holds up subcontractor payments.
2. Confirm the customer received it
Send a short email to your contact and to accounts payable asking them to confirm the invoice is in their system. “Did you get it?” is an easy question to answer, and it turns silence into a reply you can work with.
3. Find the real blocker
Ask directly: “Is anything preventing this invoice from being paid?” The answer usually falls into one of these buckets:
- Approval. The person who signs off is busy, away or doesn’t know it’s waiting on them.
- Dispute. They have a question about part of the invoice and haven’t told you.
- Process. The invoice missed this month’s payment run, or their system rejected it.
- Cash. They are waiting to be paid by their own customer, or they are short.
Each one has a different fix. If part of the invoice is disputed, ask them to pay the undisputed amount now while you sort out the rest.
4. Call accounts payable
Once an invoice is about a week late with no clear answer, pick up the phone. Ask four questions: Is it in your system? Is it approved? When is it scheduled? Which payment method? Get the name of the person you spoke to. If it isn’t approved, ask who approves it and contact that person the same day.
5. Agree a payment date in writing
A promise made on the phone is easy to forget. Send a short email the same day: “To confirm, invoice 1047 for $12,600 will be paid by ACH on June 14.” Check for the payment on that date, and if it doesn’t arrive, follow up the next business day.
6. Offer a payment plan if cash is the problem
If the customer simply can’t pay in full, a realistic plan beats a promise they can’t keep. Example: a customer owes $24,000 and offers $6,000 now, then $6,000 on the 15th of each of the next three months. Put the amounts, dates and what happens if a payment is missed in writing, and make it clear that new invoices still follow normal terms. For larger balances, ask an attorney to draft or review the agreement.
7. Pause new work or orders, if your terms allow it
If your contract or terms of sale allow it, place the account on credit hold or ask for prepayment on new orders until the balance is current. Tell the customer before you do it, in plain, factual language. Be careful in construction: stopping work can put you in breach of your subcontract if you don’t follow its notice rules, so talk to an attorney before you pull a crew off a job.
When friendly follow-up isn’t working
Signs you’ve reached this point: the customer has stopped responding for weeks, has broken several payment promises, denies owing without a real reason, or you have heard they are in financial trouble.
Send a formal demand
A demand letter lists the invoices and the amount owed, states the date by which you expect payment and explains what you will do next. Keep it factual and only mention steps you actually intend to take. Many owners have an attorney send it or review it, which also helps make sure the wording fits the rules where you and your customer operate.
Bring in a licensed collection agency or an attorney
A licensed collection agency contacts the customer in its own name, and many charge a share of what they recover. Licensing rules vary by state and province, so check the agency’s license, ask how they charge and ask how they treat business customers.
An attorney makes more sense for larger balances, contract disputes, or anything involving lien rights. In construction, lien rights often come with strict notice deadlines that vary by state and province, so involve an attorney early, ideally before an invoice is badly overdue.
Small claims court as an option to discuss with a lawyer
For smaller balances, small claims court can be a lower-cost route. Dollar limits, filing rules and who may represent a business all vary by state and province, and a judgment is not the same thing as a payment. Discuss it with a lawyer before you file.
An outsourced AR team like Extra Myle handles the day-to-day work in steps 1 to 6 in your company’s name, and you decide on step 7. It is not a collection agency or a law firm, so at the formal stage you would hand over to a licensed agency or an attorney you choose.
How to keep the customer relationship
Many customers who pay late are worth keeping. A few habits help you get paid without burning the account:
- Separate the person from the problem. The AP clerk you call didn’t create the delay. Treat them as the person who can help you fix it.
- Stay factual. Dates, amounts and invoice numbers. No threats, and no deadlines you won’t enforce.
- Escalate in steps the customer can see coming. A predictable rhythm feels professional. A sudden angry email from the owner feels personal.
- Say thank you when they pay. It costs nothing and it makes the next invoice easier.
- Decide what the account is worth. Some customers deserve tighter terms or deposits, not more patience. A few cost more to chase than they earn.
How to prevent unpaid invoices next time
Clear written terms
Get terms signed before the work starts: due date, how the clock starts, payment methods, what happens if payment is late, your right to place an account on hold and how disputes are raised. Late fees or interest only belong in your terms if your attorney confirms they are allowed where you do business.
Deposits and milestone billing
For large or custom jobs, ask for a deposit and bill at defined milestones instead of one invoice at the end. You should never be carrying the full cost of a job on your own balance sheet.
Credit checks
Run a credit application on new accounts with trade references, a bank reference and a business credit report. Set a credit limit, not just terms, and review it when a customer’s payment habits change.
Invoicing hygiene
Invoice the day the work is done or the goods ship, send it to the right inbox with the PO and backup attached, confirm receipt before the due date, and review your aging report every week. Weekly AR aging and cash-flow reporting shows you slow payers while their invoices are still young.
If you’d like a second pair of eyes on your open invoices, our invoice follow-up service page explains how we work, or you can book a free AR review and we’ll go through your aging with you.
FAQ
How long should I wait before acting on an unpaid invoice?
Don’t wait. Confirm receipt before the due date, send a reminder on the day, and call once the invoice is about a week late with no clear answer. Formal options come much later, after the friendly steps have failed.
What should I do if a customer is not paying an invoice and won’t reply?
Check that you have the right contact, switch from email to phone, then copy their manager. If the silence continues for weeks, talk to an attorney or a licensed collection agency about formal options.
Can I charge interest on an unpaid invoice?
Only if it was agreed in your contract or terms and is allowed where you and your customer do business. The rules vary by state and province, so ask an attorney before you add interest or late fees.
Should I stop working for a customer who hasn’t paid?
If your terms allow it, a credit hold on new orders is a normal step. In construction, stopping work can have contract consequences, so get advice from an attorney before you do it.
