How to chase outstanding invoices and get paid faster

Published Tuesday 19 May 2026

Table of contents

• What is an outstanding invoice?
• What's the difference between outstanding and past due invoices?
• How do unpaid invoices affect your business?
• How to chase late payments
• How to write a payment reminder email
• How to track outstanding invoices
• When you still don't receive payment
• Tips for avoiding late payments
• Streamline your invoicing with Xero
• FAQs on outstanding invoices

Key takeaways

• An outstanding invoice is any invoice that's been sent but hasn't been paid yet. It's recorded as accounts receivable and may or may not be overdue.
• Unpaid invoices can strain your cash flow, limit your ability to invest, and damage client relationships over time.
• A step-by-step approach to chasing late payments, from friendly reminders to legal action, helps you recover what you're owed while keeping things professional.
• Setting up a regular tracking routine and offering flexible payment terms can reduce late payments and keep your revenue predictable.

What is an outstanding invoice?

An outstanding invoice is an invoice that's been sent to a client but hasn't been paid yet. It could be within its payment window or past its due date.

Once you issue an invoice, it's recorded as accounts receivable on your books. It stays there until the client pays in full or you write it off. Tracking your outstanding invoices is essential for understanding how much money is owed to your business at any given time.

What's the difference between outstanding and past due invoices?

These terms are related but not identical. Understanding the distinction helps you prioritize your follow-up efforts and communicate clearly with clients.

All past due invoices are outstanding, but not all outstanding invoices are past due. Here's how the terms break down:

• Outstanding invoice: any invoice that's been sent and remains unpaid, whether or not the due date has passed
• Past due invoice (also called overdue): an invoice where the payment deadline has passed without payment
• Unpaid invoice: this means the same thing as an outstanding invoice; the two terms are interchangeable

For example, if you send an invoice with Net 30 payment terms, it's outstanding from day one. It only becomes past due on day 31 if it's still unpaid.

How do unpaid invoices affect your business?

Late payments create a ripple effect across your entire operation. According to a 2024 report, 73% of small business owners have seen late payments become more common in the past year.

When invoices go unpaid, the consequences can include:

• Cash shortages that make it harder to pay your own suppliers, employees, and operating costs
• Damaged relationships with clients, especially when you need to chase payments repeatedly
• Lost growth opportunities because cash is tied up in overdue invoices instead of being available to invest
• Increased admin time spent tracking, following up, and managing the accounts receivable process
• Higher borrowing costs if you need to take on debt to cover cash flow gaps

The sooner you address unpaid invoices, the more likely you are to recover the full amount. Payment likelihood drops significantly once an invoice passes 90 days overdue.

How to chase late payments

Chasing overdue invoices can feel uncomfortable, but a structured approach makes it easier. Follow these steps in order, escalating as needed until you receive payment.

1. Write a payment request letter or email

Start with a polite, professional reminder. Many late payments happen because of simple oversights, not intentional avoidance. Send the reminder a few days after the due date and include all the key details: invoice number, amount, original due date, and payment instructions.

Here's a brief template you can adapt:

Subject: Payment reminder: Invoice [number] now overdue

Hi [Client name],

This is a friendly reminder that Invoice [number] for [amount] was due on [date]. If you've already sent payment, please disregard this message. Otherwise, could you arrange payment at your earliest convenience?

Payment can be made by [payment methods]. Please let me know if you have any questions.

Thanks,[Your name]

2. Send an overdue invoice

If the first reminder doesn't get a response, resend the original invoice with an "overdue" label. This creates a clear paper trail and signals to the client that the matter is being tracked formally.

Update the invoice to reflect any late fees you've outlined in your payment terms. Attach it to a brief email noting that the invoice is now past due.

3. Charge a late payment fee

If your contract or invoice includes a late payment clause, apply the fee. This encourages faster payment and compensates you for the delay.

For example, if your terms specify a 2% monthly late fee on a $5,000 invoice, the client would owe an additional $100 for the first month of delay. Make sure any late fees are clearly stated in your original payment terms so there are no surprises.

4. Send a statement of accounts

A statement of accounts shows the client a summary of all their transactions with your business, including any outstanding balances. This is especially useful for clients with multiple invoices.

Sending a statement can prompt payment by giving the client a clear picture of what they owe. It also serves as a professional way to escalate without being confrontational.

5. Make the phone call and prepare to negotiate

Sometimes a direct conversation is more effective than email. Call the client to discuss the outstanding invoice and understand why payment hasn't been made.

Be prepared to negotiate. You might offer a payment plan, accept a partial payment, or agree on a revised due date. Flexibility can preserve the relationship while still getting you paid. Document any agreements in writing after the call.

6. Cut them off until outstanding invoices are paid

If a client continues to ignore payment requests, consider pausing future work or services until they settle their balance. This protects your business from accumulating more unpaid invoices.

Communicate this clearly and professionally. Let the client know you value the relationship but can't continue providing services while previous invoices remain unpaid.

7. Hire a debt collector

When your own efforts haven't worked, a professional debt collection agency can step in. They have the tools and legal knowledge to pursue payment on your behalf.

Debt collection fees typically range from 15% to 30% of the amount recovered. While this cuts into your total, recovering a portion of the debt is better than writing it off entirely. Choose a licensed agency with a good reputation.

8. Take legal action

Legal action is the last resort for recovering unpaid invoices. In Canada, small claims courts handle disputes up to a set dollar amount, which varies by province.

Before filing, consult a lawyer or check your provincial small claims court website for the process, filing fees, and limits in your jurisdiction. Keep all documentation: invoices, contracts, emails, and records of follow-up attempts. This evidence is essential if you end up in court.

How to write a payment reminder email

A well-written payment reminder email increases your chances of getting paid quickly. The tone and timing of your message matter just as much as the content.

Every payment reminder should include these key elements:

• A clear subject line that mentions the invoice number and purpose
• A professional, friendly tone that avoids sounding aggressive
• Invoice details: number, amount, and due date
• Payment instructions so the client can act immediately
• A direct call to action asking when you can expect payment

Here's a sample email you can customize for your business:

Subject: Follow-up on Invoice [number], [amount] due [date]

Hi [Client name],

I hope you're doing well. I'm following up on Invoice [number] for [amount], which was due on [date]. As of today, the balance remains unpaid.

Could you let me know when payment will be processed? If there's an issue with the invoice, I'm happy to discuss it.

You can pay by [payment methods]. I've reattached the invoice for your reference.

Thanks for your attention to this.[Your name]

Adjust your tone based on how far past due the invoice is:

• Before the due date: a gentle heads-up that payment is coming due soon
• On the due date: a friendly reminder that payment is due today
• 1 to 7 days after: a polite follow-up noting the invoice is now overdue
• 30 or more days after: a firmer message outlining next steps if payment isn't received

How to track outstanding invoices

Consistent tracking is the foundation of healthy accounts receivable. Without a regular routine, overdue invoices can slip through the cracks and become harder to collect.

Set aside time each week to review your outstanding invoices. During this review, categorize each invoice by how long it's been unpaid:

• Current: not yet past due
• 1 to 30 days overdue
• 31 to 60 days overdue
• 61 to 90 days overdue
• 90 or more days overdue: highest priority for follow-up

Beyond ageing, assign a status to each invoice so you know what action to take next:

• Awaiting approval: invoice sent, waiting for client confirmation
• Pending payment: client has acknowledged the invoice and payment is expected
• Needs follow-up: no response received, time to send a reminder or escalate

You can track invoices manually with a spreadsheet, but automated invoicing software saves time by flagging overdue invoices, sending reminders, and generating ageing reports for you.

When you still don't receive payment

Sometimes, despite your best efforts, a client simply won't pay. At that point, you have two practical options to consider.

Write off the unpaid invoice

If you've exhausted all collection efforts, you may need to write off the invoice as a bad debt. How you record this depends on your accounting method.

Under accrual accounting, you've already recorded the revenue when you sent the invoice. Writing it off means creating a bad debt expense to reduce your accounts receivable balance. Under cash accounting, you only record revenue when payment is received, so there's nothing to reverse.

You can write off bad debts in your accounting software to keep your books accurate. Consult your accountant to confirm the right approach for your business.

Perform credit checks on prospective clients

Prevention is better than recovery. Running a credit check before taking on a new client helps you assess their ability to pay on time.

Credit reports reveal a potential client's payment history, outstanding debts, and overall financial health. This information lets you make informed decisions about extending credit, setting payment terms, or requiring upfront deposits.

Tips for avoiding late payments

The best way to deal with outstanding invoices is to reduce them in the first place. These strategies can help you get paid faster and keep your cash flow steady.

Set time aside to track outstanding invoices

Schedule a weekly check-in to review your invoicing and follow up on anything overdue. A regular routine keeps late payments from piling up.

Take partial payment upfront

Requesting a deposit before you start work reduces your risk. Even 25% to 50% upfront ensures you're not fully exposed if the client is slow to pay the balance.

Offer early payment discounts

An early payment discount gives clients a reason to pay ahead of schedule. For example, a "2/10 Net 30" discount means the client saves 2% if they pay within 10 days, with the full amount due within 30 days. Even a small discount can significantly speed up your collections.

Offer payment plans to clients

For larger invoices, offering a payment plan can make it easier for clients to manage the cost. Breaking a large sum into smaller instalments increases the chance you'll receive the full amount over time.

Use accounting software

Accounting software automates invoice reminders, tracks payment status in real time, and generates ageing reports so you can see exactly where your receivables stand. This saves hours of manual follow-up each week and helps you catch overdue invoices early.

Streamline your invoicing with Xero

Chasing outstanding invoices takes time away from running your business. Xero's online invoicing makes it easier to send professional invoices, set up automatic payment reminders, and track what's owed in real time.

With features like automated invoice reminders, bank reconciliation, and real-time cash flow tracking, Xero helps you stay on top of your receivables without the manual effort. Connect to apps through the Xero App Store to extend your setup even further.

Ready to take control of your invoicing? Get one month free and see how Xero can simplify your accounts receivable.

FAQs on outstanding invoices

Here are answers to frequently asked questions about outstanding invoices for small business owners in Canada.

Is an outstanding invoice the same as an unpaid invoice?

Yes. An outstanding invoice and an unpaid invoice mean the same thing: an invoice that's been sent but hasn't been paid yet. Both terms are used interchangeably in accounting.

How long should I wait before chasing an outstanding invoice?

Send a polite reminder within one to three days after the due date. The sooner you follow up, the more likely you are to receive payment. Waiting too long reduces your chances of collection.

Can I charge interest on outstanding invoices?

Yes, as long as you've included a late payment clause in your contract or payment terms. In Canada, the Interest Act requires you to disclose the interest rate on an annual basis. Make sure your terms clearly state the rate and when it applies.

What should I do if a client disputes an outstanding invoice?

Review the client's concern promptly and provide supporting documentation such as your contract, work records, or delivery confirmations. If you can't reach an agreement, consider mediation before pursuing legal options.

Do unpaid invoices expire?

In Canada, the limitation period for collecting on an unpaid invoice varies by province, typically ranging from two to six years. After the limitation period passes, you can no longer pursue the debt through the courts. Check your province's specific rules to understand your timeline for collection.