You know the drill: you get a job request, send the quote, get approval from the customer, complete the job, and invoice when it’s complete. And then, you wait for payment.

But then days pass and the payment never deposits into your bank account—you’re left with an outstanding invoice.

It’s a common (and frustrating) part of running a home service business. Even though it might be typical, it doesn’t mean you can ignore the fact that unpaid invoices are harmful to your cash flow and the overall health of your business.

When those one or two unpaid invoices start to rack up and they become a habit, your business can suffer in more ways than one.

In this guide, learn more about the impact those unpaid invoices have on your cash flow, and straightforward ways to deal with them so you can get paid and keep growing your business.

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How unpaid invoices impact your business’s cash flow

Slow payments or unpaid invoices hurt small business owners in a number of ways. This is especially true for businesses that rely on big ticket jobs or have multiple unpaid invoices accumulating.

Outstanding payments are bad news for a home service business and they can:

1. Force owners to take a pay cut

When outstanding invoices start to impact a business, the business owner typically takes the first blow. Owners often think there’s no serious harm in paying themselves late or not paying themselves at all—they can manage not getting paid, whereas their employees or their suppliers can’t.

But regularly taking a pay-cut or not paying yourself is an unsustainable business practice that will only hurt you in the long run.

READ MORE: How to manage your accounts receivables

2. Bring on hiring freezes

When invoices go unpaid and money stops coming in, some home service businesses have to decide between paying themselves and hiring new employees.

You might not be able to fill essential or non-essential roles if you don’t have the cash flow to sustain new employees. Hiring is a costly investment but it’s also an important part of a businesses growth. If you’re hiring, you’re growing. When that comes to a halt, your business suffers.

3. Cut marketing costs

Your services and professionalism is what creates repeat customers. Your marketing is what got those customers to you in the first place. When unpaid invoices accumulate, marketing expenses often get cut. But for a small business to grow, you need to consistently bring in new customers to fuel your bottom line.

4. Halt new equipment purchases

Do you have a lawn mower that needs a new part? Or are you in desperate need of a second truck to expand your operations? When so many outstanding invoices pile up, you’re less likely to be able to make those business-changing purchases.

Getting new equipment often means you’re able to provide new services, reach new customers, and ultimately expand your business. But unpaid invoices can put all of that on the back burner if your cash flow isn’t healthy.

5. Reduce employee pay

Payroll hours might be on the chopping block when outstanding invoices pile up. You may have to cut employee hours, which puts stress on your employees and their livelihoods. It can cause your team uncertainty or shake their trust in you, and it often means that owners themselves have to take on more (unpaid) work.

How to collect unpaid invoices and bills politely

Before you pursue legal action or hire a collection agency to chase down past due invoices, there are a few steps you can take to politely and tactfully collect payments on unpaid invoices. Here’s what you should do first:

Send a friendly reminder message
Sometimes a polite nudge in the form of a reminder email or a phone call is all it takes to turn those unpaid bills into paid invoices.

Resend your invoice
In case your customer lost the invoice or just completely forgot about it, resending the invoice can prompt the customer to remember and pay.

READ MORE: Want more? Here are the 5 steps you need to take when a customer won’t pay


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What causes unpaid invoices?

While unpaid or outstanding invoices can be frustrating for you as a business owner, you don’t always know the full story behind them. From your client’s perspective, what are some possible reasons why your customer lets an invoice go unpaid?

  • Your client forgot to pay. They may be dealing with personal issues, like a family emergency or an illness. They could have also been out of town on business or vacation. Sometimes there are no bad intentions behind a missed payment and customers simply forget. Just like you, they also have a lot going on in their lives!
  • There’s been a miscommunication. Double check that you have the right email address, phone number, and even customer name on your original invoice. It’s also possible that there was an error in the payment due date.
  • It’s difficult for the customer to actually pay you. Are you unintentionally making it hard for your customers to make a payment? Consider the overall experience when you think about how your customers make payments to you. It may be time for online payment software to make it easier, and faster for your customers to pay you on time.
  • Your customer is purposefully avoiding payment. Not every unpaid invoice is malicious, but it is still possible that a nonpayment may be due to a customer avoiding paying up. When you’ve ruled out the other possibilities, it may be time to take more serious action on those unpaid invoices—there’s more on that later. If a client constantly misses payments, that’s one too many red flags—it’s time to consider firing your client.

How to avoid outstanding invoices in the first place

It’s important to remember unpaid invoices aren’t 100% avoidable. But, there are a few practices you can put in place to help deter your customers from letting invoices go unpaid:

1. Set clear payment terms on your invoices

Whether it’s net 30 or upon receipt, make sure your invoices clearly state the payment terms.

They should tell customers:

  • How to pay you
  • The payment due date
  • What happens if payment is late

These payment terms need to be clear and noticeable on the invoice so there’s no confusion when it comes time for your customer to make their payment.”

2. Put an invoice late fee or penalty in place

A late payment fee may just be the motivation your customers need to make sure they pay on time. After all, no one likes to pay a fee!

Just remember: if you don’t currently charge late payment fees, you’ll have to communicate this policy change to all of your customers. You can include it on their next invoice, and in the email or text message you use to send your invoice. The last thing you want is to surprise an unknowing customer with a late fee—especially one with a good track record!

READ MORE: Should businesses charge late fees on invoices?

3. Allow customers to pay invoices in installments

Instead of only allowing customers to pay for a service upfront in one cost, you can allow them to pay in installments overtime with customer financing. This is especially handy for bigger, more costly jobs but it can easily work for any service business.

By allowing customers to pay over time, you impress customers with your flexibility and you make it easier for them to pay you. Best of all, you won’t suffer from the same cash flow problems because of unpaid invoices. Bonus: customer financing can help you win over potential clients, too.

READ MORE: Get paid faster when you use consumer financing with Jobber

4. Automate payment reminder follow-ups

Payment reminders are great, but payment reminder follow-ups are even better. By automating your payment reminders, you spend less time and resources chasing down payments, and more effort on the big picture of your business.

Pro Tip: You can use field service invoicing software to send automated follow-ups on invoices and prompt customers to pay their overdue invoices. Software like Jobber will send out an automatic follow-up to your client by email or text asking them to pay the outstanding balance, so you don’t have to.

Example of a text message follow up for an outstanding invoice
An example of what a text message follow-up for an unpaid invoice looks like using Jobber

5. Accept online payments to make paying invoices easier

What are your payment options? Are you only sending invoices and accepting payments by mail? Sometimes a complicated payment process is what’s blocking your customers from paying their invoices on time or even making early payments. Consider switching to credit card payments to make things easier for your customers.

What happens if a customer still doesn’t pay an invoice?

If you’ve tried all of the methods above to get a customer to pay an outstanding invoice, including getting in touch, resending invoices, and automating reminders, it’s probably time to explore legal action.

First off, you can hire an attorney to send a demand letter to your customer on your behalf. A message from your lawyers may just push your customer to pay their invoice. But if that doesn’t work, your attorney can help you decide to output forward a lien or a lawsuit.

The next step after that would be small claims court. Learn more about how to pursue legal action when a customer won’t pay their invoice.

It’s always good to remember that while unpaid invoices are damaging to your business in the long run, taking legal action is expensive and best reserved for the most serious cases, and the most expensive jobs.

Automate your unpaid invoice follow-ups

Stop chasing down payments. Jobber automatically tracks and sends customized email or text follow-ups to customers