Who Owes You Money? A Simple Way to Track Unpaid Invoices
To track unpaid invoices you need seven columns and one habit: a list of every invoice sent, with the date it is due and the date it was paid, looked at once a week.
Most owners know roughly who owes them money. Very few know the total, or how old the oldest part of it is. That total has a name, accounts receivable, and it is often the largest sum of money a small business does not look at.
Here is the list, the one table that makes it useful, and a schedule for following up that does not rely on feeling brave.
Getting paid sooner starts with the invoice itself, which we cover in how to invoice clients to get paid faster. This post is about what happens after you press send.
A list you can sort by date is most of the method. Example data.
The short version
List every invoice with its amount, due date and paid date.
Sort what is unpaid by how late it is. That is an aging table.
The older an invoice gets, the less likely it is to be paid in full.
Follow up on fixed days, with the same words every time.
The seven columns
Invoice number. So you and the client mean the same thing.
Client.
Date sent.
Amount.
Date due. Sent date plus your terms.
Date paid. Empty until it is.
Last follow-up. The date and what you said.
Everything else can be worked out from these. Days late is today minus the due date. What you are owed is every row with no paid date.
The table that makes it useful
Take every unpaid invoice and put it in a column by how late it is. Accountants call this an aging report.
Age | Amount owed | Share of the total, rounded |
|---|---|---|
Not yet due | $3,200 | 46% |
1 to 30 days late | $1,800 | 26% |
31 to 60 days late | $950 | 14% |
61 to 90 days late | $600 | 9% |
More than 90 days late | $400 | 6% |
Total owed | $6,950 | 100% |
In this example $3,750 of the $6,950, or 54%, is already past its due date. This owner would have said she was owed "a few thousand" and that most clients pay on time. Both were roughly true, and neither was useful.
The bottom two rows are where to look first. An invoice more than 60 days late has usually stopped being a delay and become a conversation someone is avoiding.
Why age matters more than amount
A large invoice that is three days late will almost certainly be paid. A small one that is four months late may not be. Time is what turns a receivable into a loss, so the oldest rows get your attention before the biggest ones.
A follow-up schedule that does not need courage
Chasing money is uncomfortable, so most people do it when they are annoyed, which is the worst time. Fixed days and fixed words take the feeling out of it.
When | What you send |
|---|---|
3 days before it is due | A friendly reminder with the invoice attached and how to pay |
1 day late | "This one was due yesterday. Could you let me know when to expect it?" |
7 days late | The same message, plus a question: is anything holding it up? |
14 days late | A phone call, then a note confirming what was agreed |
30 days late | A written notice that further work is paused until it is settled |
Write the date and the message in your last column each time. When you do speak to the client, you will know exactly what has already been said.
When a payment arrives, it gets matched to the client it came from. Example data.
Five ways to have less to chase
Take a deposit. Even 25% up front changes who is carrying the risk.
Shorten your terms. Fourteen days is as normal as thirty, and clients pay to the date you set.
Invoice the day the work is done. Every day you wait is a day added to their terms.
Make paying easy. A link beats a bank transfer, and a bank transfer beats a check.
Put a late fee in your terms before you need one. You can always choose to waive it.
What this has to do with tax
Most sole proprietors report income when it is received, not when it is invoiced. Under that method an unpaid invoice is not yet income, so it is not yet taxed. It also means the money you are owed is real work you have not been paid for, and nothing in your tax return will remind you it exists.
It is also the gap between profit and cash. Our post on the difference between a tax bill and a cash flow problem shows how a business that invoices well can still have an empty account.
Three mistakes
Tracking in your inbox. Sent mail is not a list, and it cannot be added up.
Chasing the newest first. It feels easier. The oldest is the one at risk.
Starting new work for a client who owes for the last. The total owed should be in front of you when you say yes.
What you are owed is part of what you own
Money a client owes you is an asset. La Soglia, the free membership of the Money Mastery System, holds everything you own and owe in one place, personal and business together, with no bank connection and no card. Enter the total you are owed as one line and update it when you do your weekly check.
Bring it to the Collective
Wording a follow-up is easier with a second pair of eyes. The Money Mastery Collective has a discussion feed open on the free membership. Post your draft and ask.
Questions we hear
How do I keep track of unpaid invoices?
Keep one list with the invoice number, client, date sent, amount, due date, paid date and last follow-up, and review it weekly.
What is an aging report?
A table that groups unpaid invoices by how late they are, such as 1 to 30 days and 31 to 60 days, so the oldest stand out.
When should I follow up on a late invoice?
The day after it is due, then at 7, 14 and 30 days, using the same wording each time.
Is an unpaid invoice taxable income?
Under the cash method most sole proprietors use, income is generally reported when received. Ask your preparer which method you use.
References
On reporting income when it is received, see the IRS Instructions for Schedule C (Form 1040) on accounting methods. Every figure in this post is our own worked example.
Related guides: How to do your own bookkeeping, step by step · Home based business bookkeeping: a one-page checklist · Where does my money go? A simple money tracker.
Start free with La Soglia
La Soglia is the free membership of the Money Mastery System. It gives you the Net Worth Tracker, where everything you own and everything you owe sits in one place, and the Money Mastery Collective. There is no card to enter and no bank connection.
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A note on what this is
This article is educational. The Money Mastery System is an educational tool, not financial software, and nothing here is legal, tax, investment or financial advice. The figures and follow-up wording are illustrations, and what you can charge or enforce depends on your contract and local law. For guidance on your own circumstances, please speak with a qualified professional who knows them.
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