Why every day matters if your invoice is overdue

There is a saying among debt collection agencies that every day an invoice is overdue, there’s one percent less chance of the invoice being recovered. The most common response to an overdue invoice is waiting (and typically realizing it weeks after the fact). The problem with this response is that every day an invoice goes overdue, the more likely it is you will never get paid in the end. But why is this the case? Why is it so important to react fast?

Understanding why urgency matters when an invoice is overdue

Let’s say you send out 100 invoices, and 20 of them are not paid on time (this is pretty standard in most markets). 1-2 Weeks after, it’s quite likely you’re down to 10 overdue invoices.

The problem is, those ten who did not pay are not a random segmentation of your entire customer base: it’s a biased segmentation of those who are the least likely to go bust.

Some of the common reasons for the missing payment will be:

The customer doesn’t have the cash right now
The customer forgot or didn’t get to it
The customer disagrees with your invoice in some way
The person paying your bill is on vacation

The problem with all of the above reasons is that they’re signs of problems:

Not having cash right now? Often a bad sign and not uncommon, this leads to bankruptcy
Did the customer forget? Often a bad sign as these business owners are unstructured and is probably more likely to face problems.
Disagreement with the invoice? You risk finding a settlement or, even worst case, a lawsuit. That could take years, and you’re not sure you will get paid.
On vacation is not a bad sign, but … It could also just be an excuse from the customer

The problem is that the missing payment is a sign. And it’s unfortunately widespread that this sign is just an early predictor of even more significant issues. Later and later payments are a sign of growing pains. This is why you want to be up-front on overdue payments and be aggressive around reminding your debtors. The reason is that the debtors will prioritize who they pay – and those who are the most aggressive will be the ones who get paid. That is why:
Be proactive!

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