Outstanding invoices: how to track and chase them step by step

Published Tuesday 6 October 2026

Table of contents

• What are outstanding invoices?
• How do unpaid invoices affect your business?
• How to track outstanding invoices
• How to chase late payments: a 10-step workflow
• How to prevent outstanding invoices
• Manage outstanding invoices with Xero
• FAQs on outstanding invoices

Key takeaways

• Track outstanding invoices with an accounts receivable aging report and accounting software, so you can see what’s overdue at a glance
• Chase late payments with a 10-step workflow that starts with automated email reminders and escalates through phone calls and late fees to debt collection
• Write reminder emails with the invoice number and due date in the subject line, plus the amount owed and a payment link
• Prevent outstanding invoices with clear payment terms, upfront deposits and credit checks on new clients for larger projects

What are outstanding invoices?

When you understand the difference between outstanding, overdue and unpaid invoices, you know when and how to take action.

Outstanding vs overdue invoices

Outstanding invoices are bills you’ve sent that haven’t been paid yet, regardless of whether the due date has passed.

Overdue invoices (also called past due invoices) are outstanding invoices where the payment deadline has passed. These require immediate follow-up.

All overdue invoices are outstanding, but not all outstanding invoices are overdue. An invoice sent yesterday with a 30-day payment term is outstanding but not yet overdue.

Outstanding vs unpaid invoices

The terms ‘outstanding’ and ‘unpaid’ are often used to mean the same thing. Both refer to an invoice that a client hasn’t paid yet.

The key is to know whether the invoice is simply outstanding (within its payment terms) or if it’s overdue (past its due date).

How do unpaid invoices affect your business?

Unpaid invoices disrupt your cash flow and make it harder to cover operating costs or plan for growth. Late payments create a ripple effect across your business.

Here’s how outstanding invoices affect your business:

• Cash flow gaps: paying suppliers, staff and yourself depends on clients paying you on time
• Supplier relationships: timely payments to your vendors help maintain supply schedules and strong partnerships
• Credit rating impact: consistent payments to creditors help maintain your business credit score
• Future work: a strong payment reputation makes it easier to win new clients and contracts

Successfully invoicing and managing unpaid invoices supports your business’s long-term financial health.

How to track outstanding invoices

Before you can chase late payments, you need a system to identify which invoices are outstanding and when they’re due. Setting time aside to regularly track your invoices helps you spot overdue payments early.

Set up an aging report

An accounts receivable aging report lists all your outstanding invoices and groups them by how long they’ve been unpaid, for example, 1–30 days, 31–60 days and so on. This report gives you a clear picture of who owes you money and which payments need your attention first.

Use accounting software to track invoices automatically

Manual tracking can be time-consuming, so accounting software like Xero automates this process for you. You can see the status of all your invoices on a single dashboard, so you always know what’s been paid and what’s overdue.

Once you can see what’s due, the workflow below shows you how to follow up on each invoice.

How to chase late payments: a 10-step workflow

Chasing payment works best as an ordered process. Work through these 10 steps in order, starting with gentle reminders before the due date and escalating only if payment doesn’t arrive.

1. Set up automated email reminders

Your follow-up starts before the invoice is late. A consistent reminder schedule keeps the payment top of mind for your clients without extra work for you.

Send the first reminder a few days before the due date, the next on the due date, then more at set intervals after it passes. In Xero, you can schedule invoice reminders to go out a set number of days before or after the due date.

Name the invoice number and due date in the subject line, for example, ‘Reminder: invoice INV-1042 due 15 July’. Keep the body short and polite, and include the amount, the due date and a payment link.

When you accept online payments, clients can pay straight from the email. Attach the invoice again so they have everything in one place, and make your tone firmer with each reminder that follows.

2. Send a payment request letter or email

A payment request letter is a polite reminder you send when you first notice an invoice is overdue. In most cases, this simple follow-up prompts payment, and if the late payment is intentional, it creates a paper trail for further action.

Act quickly and professionally to check whether the delay was made in good faith. Open with a friendly greeting, then reference the specific invoice number, due date and amount owed.

Next, politely ask when you can expect payment and add a brief reminder of your payment terms. Keep it short, since the payment details are already on the original invoice.

3. Resend the invoice marked overdue

An overdue invoice is your original invoice with an ‘overdue’ stamp added to create urgency. If your payment request letter gets no response, send this stamped invoice as a formal follow-up.

Attach the overdue invoice to a follow-up email to remind your customer of the outstanding payment. You can track these follow-ups manually or use invoicing software to send payment reminders on your behalf until payment is received.

4. Send a statement of accounts

A statement of accounts summarises all outstanding payments from a single client in one document. Send this when you have more than one unpaid invoice with the same customer.

This approach saves admin because you chase several invoices in one go. Accounting software can consolidate your unpaid invoices automatically, and a follow-up phone call makes sure your client received the statement.

5. Make the phone call and prepare to negotiate

Phone calls get better results than emails when chasing late payments. Clients find it harder to ignore you when you’re speaking directly.

Greet the client, then reference the specific invoice numbers and dates. Ask when you can expect payment, and stay silent while you wait for their response, even if they hesitate. Stay on the call until they commit to a payment date.

Be prepared to negotiate. If the amount is small and they can pay soon, you might agree to extend the deadline. You might also pause new work until the outstanding balance is cleared.

Learn which payment negotiation strategy suits your situation. If you’d prefer not to handle overdue invoices on the phone yourself, ask your bookkeeper or accountant to manage it on your behalf.

6. Charge a late payment fee

Late payment fees encourage clients to pay on time and compensate you for delayed cash flow. Include your late fee policy in your payment terms before starting work.

Keep the fee structure simple, because a flat fee is easier for clients to understand than a percentage. Here’s how a flat fee might look on an invoice:

• Due by 1 June: Rp1.000.000
• Due after 1 June: Rp1.100.000

If a client misses the deadline, let them know the fee now applies. To maintain goodwill, offer to waive the fee if they pay within 48 hours.

7. Pause work until outstanding invoices are paid

Stop work if a client isn’t paying or responding to your messages. Continuing to deliver services to someone who won’t pay puts your business at risk.

Tell the client clearly that you’ll resume work once all outstanding invoices are paid in full. Protecting your cash flow takes priority.

8. Hire a debt collector

Debt collection services recover payments from clients who haven’t responded to your collection efforts. Use this option after other collection methods have failed.

Debt collection agencies usually charge a fee or a percentage of the amount they recover, so check their terms first. In some cases, you can pass these costs on to the debtor.

Browse debt collection apps that connect with Xero in the Xero App Store.

9. Explore legal options

Legal action is your final option after debt collectors have been unsuccessful. The right approach depends on the debtor’s business structure, whether they’re a sole proprietor, partnership or company.

Your options may include:

• Small claims court: for lower-value invoices with straightforward disputes
• Civil litigation: for larger amounts or complex cases requiring legal representation

Consult a lawyer who specialises in debt recovery, and seek local legal advice to understand your options in Indonesia. Your debt collector may have in-house legal expertise or can refer you to a specialist.

10. Write off the unpaid invoice

When payment remains uncollected, you may need to write off the invoice as a bad debt. This matters for tax purposes, and the right move depends on your accounting method.

If you use accrual accounting and you’ve already reported the income and paid tax on it, write off the invoice to claim the tax back. You’ll need to prove to your tax authority that the debt is uncollectable, so keep your correspondence with the client as evidence.

If you use cash accounting, you only count revenue when it’s collected, so you can skip writing off the invoice. Just exclude the amount from your income statements. Xero can help you track, manage and write off bad debts in your accounting.

How to prevent outstanding invoices

When you prevent late payments, you save time and protect your cash flow. Set up these systems to encourage on-time payment from the start.

Set clear payment terms upfront

Your payment terms should be clear on every invoice, whether you post a paper copy or send invoices online. Include the due date, the payment methods you accept and any fees for late payments.

Discuss these terms with your client before you start work to make sure you both understand them.

Set time aside to track outstanding invoices

Track regularly to spot overdue invoices early and send reminders before payments slip further. Schedule weekly time to review your accounts receivable process and follow up on anything past due.

Prompt action keeps payments on track and client relationships strong.

Take partial payment upfront

Upfront deposits reduce your risk of non-payment and help you manage your cash flow. Request a deposit before starting work, either a fixed amount to cover core costs or a percentage of the total fee.

Partial payments help you:

• cover your costs before delivering the full service
• identify clients who may not intend to pay
• confirm the client’s commitment before you begin
• receive payments throughout the project

Offer payment plans to clients

Payment plans let clients pay in instalments instead of all at once. This approach works well for large invoices or long-term projects.

Structure payments around project milestones. For example, you could split the fee like this:

• 25% upfront before work begins
• 25% at the halfway point
• 50% on completion

If a client struggles to pay after completion, offer to split the balance into monthly instalments. Payment plans ease cash flow for both of you and help you collect before invoices become overdue.

Perform credit checks on prospective clients

Credit checks reveal whether a potential client pays bills on time and honours their debts. Run a check before agreeing to large projects or ongoing work.

A positive credit score suggests the client will pay promptly and you won’t need to chase them. A low score suggests you should take extra precautions, such as requiring upfront payment or choosing not to take on the work.

Use accounting software to automate reminders

Automated invoicing software sends payment reminders without manual effort. Xero can prompt customers to pay on your behalf, saving you time and reducing late payments.

Key automation features include:

• Automatic payment reminders: scheduled emails sent before and after due dates
• Real-time tracking: a view of which invoices are outstanding at a glance
• Statements of account: a client’s unpaid invoices consolidated in one document
• Online payment options: a way for clients to pay directly from the invoice

Manage outstanding invoices with Xero

Chasing payment is easier when each step runs on schedule. Xero automates payment reminders and tracks aging invoices, so you can stay on top of who owes you.

With Xero, you can:

• Send automatic reminders: schedule payment prompts before and after due dates
• Track outstanding invoices: see what’s owed at a glance with real-time dashboards
• Accept online payments: let clients pay directly from invoices
• Integrate with your workflow: connect invoicing to your broader accounting system

Ready to take the hassle out of chasing payment? Get one month free and see how Xero simplifies invoice management.

FAQs on outstanding invoices

Here are answers to common questions about managing and collecting outstanding invoices.

What are outstanding invoices?

An outstanding invoice is a bill you’ve sent that hasn’t been paid yet. The term applies whether the payment is still within the due date or already overdue.

What is the difference between outstanding and overdue invoices?

Outstanding invoices are any unpaid bills, while overdue invoices are outstanding invoices where the payment deadline has passed. Every overdue invoice is outstanding, but an outstanding invoice only becomes overdue once its due date passes.

Is an outstanding invoice the same as an unpaid invoice?

Yes. Outstanding invoice and unpaid invoice mean the same thing: a bill that has been issued but not yet paid.

How long should I wait before chasing an outstanding invoice?

Send a polite reminder the day after the due date passes. If you haven’t received a response within a week, follow up with a phone call.

Can I charge interest or late fees on outstanding invoices?

Yes, if you include late fee terms in your original payment agreement. Share your late fee policy before starting work so clients know what to expect if they pay late.

What should a payment reminder email include?

Include the invoice number, amount owed, due date and a link to pay online, with the invoice attached. Close by asking the client to confirm when they’ll pay, so you have a clear date to follow up on.