How to Collect Unpaid Invoices (A Contractor's Escalation Plan)

To collect an unpaid invoice, follow a fixed escalation: a friendly reminder at the due date, a text and email at 7 days, a phone call by 30 days, a formal past-due letter at 45 to 60 days, then a final demand naming your next step: a mechanics lien, small claims court or a collection agency. Document every contact.

What should you do before an invoice is late?

Collections start at the estimate. Payment terms, deposit, accepted payment methods and any late fee should be in the signed agreement. The invoice should go out the day the work is done, with photos, a clear amount due and a pay-now link. If you do those two things, most of what follows never happens. See how to get paid faster.

The collection timeline, step by step

1. 1

   3 days before due: a courtesy reminder.

   A short text or email: "Hi Dana, a reminder that invoice #1042 for $1,850 is due Friday. Here's the link to pay by card or bank transfer. Thanks again for having us out." Automate this one.

2. 2

   Due date: a second reminder.

   Same tone, same link. Many customers pay on this message.

3. 3

   7 days past due: text and email, still friendly.

   "Invoice #1042 for $1,850 was due on the 10th. If it's already on its way, thank you. If not, here's the link, or call us and we'll take a card over the phone."

4. 4

   14 to 30 days past due: pick up the phone.

   Ask for a specific commitment: "Can you pay by card today, or should I expect a check by Friday?" Note the date, the person and what they promised. If there's a dispute, this is where you hear it, and you can fix a problem instead of fighting about it.

5. 5

   30 days: written past-due notice.

   A letter or email on your letterhead with the invoice attached, the balance, any late fee allowed by your contract and state, and a payment deadline. Keep it factual. Pause new work on credit for this customer.

6. 6

   45 to 60 days: final demand.

   State the balance, the deadline (often 10 days) and what happens next: a lien filing, small claims, or referral to a collection agency. On construction work, this is also when a preliminary notice or notice of intent to lien may be due; check your state's lien rules.

7. 7

   After the deadline: act.

   Do what you said. File the lien, file in small claims, or turn it over. A demand you don't follow through on teaches the customer you won't.

Can you charge late fees or interest?

Only what your signed agreement allows and your state permits. Rules differ between consumer and commercial customers, and some states limit the percentage, require specific disclosure, or treat late fees as interest subject to usury caps. Intuit's QuickBooks late fee help page says plainly that there may be limits on the amount and type of fees you may charge and to confirm the requirements in your jurisdiction. If you use QuickBooks Online's automatic late fees, they apply only to invoices that become overdue after you turn the setting on, so older invoices need fees added manually, if your contract allows them at all.

Practical approach: put a modest late fee in the estimate and contract, tell customers about it up front, and use waiving it as a goodwill gesture when a slow payer finally pays. Don't invent a fee at day 45.

What are your legal options when a customer won't pay?

What rules apply when you collect your own invoices?

The federal Fair Debt Collection Practices Act (FDCPA) regulates third-party debt collectors collecting consumer debts (debts for personal, family or household purposes). Under 15 U.S.C. §1692a(6), a creditor's own officers and employees collecting the creditor's debts in the creditor's name are generally not "debt collectors" under the Act, though a creditor that collects under a different name that suggests a third party is involved can be covered. So a contractor calling about its own invoice is usually outside the FDCPA. State laws may still apply to original creditors, and in every case: don't threaten what you can't legally do, don't call at unreasonable hours, don't discuss the debt with the customer's neighbors or employer, and keep it professional. A collection agency you hire is covered by the FDCPA, and its conduct can come back on you.

Collections by trade

Common collection mistakes

• Waiting. An invoice nobody mentioned for 60 days signals that payment is optional.
• Emotional messages. Angry texts get screenshotted. Stay factual and keep records.
• Threatening a lien you can't file. Deadlines may have passed, or the work may not qualify. Know your rights first.
• Continuing to work for a non-payer. Stop new credit work until the account is current.
• No paper trail. Signed estimate, photos, completion sign-off and a log of every contact win disputes.
• Treating all customers the same. A loyal customer who's a week late gets a friendly call; a stranger at 60 days gets the formal letter.