You did the work. You did it well. The customer was happy. That was in March.
It is August and you are still sending the invoice.
Every contractor has some version of this, and most treat it as an annoyance instead of what it is: an interest-free loan you made to somebody who did not ask for it and is in no hurry to repay it.
Late money is more expensive than it looks
The obvious cost is the cash you do not have. That is the small part.
The real costs stack up behind it. You are carrying a credit line or a card balance you would not need if the money had landed on time. You are turning down or delaying the next job because you cannot float the materials. You or your office are spending hours a month chasing, which is time nobody bills for. And there is the part you cannot put in a calculator, which is what it does to you on a Sunday when you are doing the math in your head instead of resting.
Price out what your late invoices cost
Pull your aging report, or your shoebox, and put in what is actually outstanding and how long it has been sitting. The cost of late payment is not just the money, it is the money you cannot use.
Your numbers
What that means
Cutting 42 days down to 15 would put $35,507 back in your account and keep it there.
Deposit up front, card on file, auto-reminders at day 3, 7 and 14. That fixes most of this without one awkward phone call.
What this assumed
- The cost of tied-up cash is charged at the rate you enter, whether that is a line of credit or lost opportunity.
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This is an estimate
This tool returns an estimate based on the numbers you entered. Your real result depends on your own costs, rates and conditions. Check it against your own records before you make a decision with it.
How to run it, step by step
- 1Total what is genuinely outstanding. Everything invoiced and unpaid past its due date. Not work in progress and not what you have not billed yet. If you have not billed it yet, that is a different and more fixable problem.
- 2Use real days late, not average terms. Count from the due date, not the invoice date. If your terms are net 30 and it has been 90 days, that is 60 days late, and 60 is the number that costs you.
- 3Put in what the money would be doing. If you are carrying a line of credit or a card balance, use that rate, because that is literally what the delay is costing you. If you are not borrowing, use what you would have earned putting it into the next job.
- 4Count the chasing. The hours you or your office spend calling, texting, resending and following up. That time is real, it is unbilled, and it is usually the part owners underestimate most.
How to read what it gives you
- The carrying cost is the polite number. The number that matters is what those dollars would have earned in your next job, because that is the actual opportunity you gave up.
- If a handful of customers account for most of your late money, this is a customer problem, not a process problem. Fix the terms you give those specific people.
- Compare the total to what a deposit policy would have covered. In most contracting businesses, deposits alone would have prevented most of what is on that report.
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The two changes that stop most of it
Everything else on the internet about this is about chasing better. Chasing better is losing more slowly. These two change what gets chased in the first place.
1. Deposits and progress payments, written into the estimate.
Never fund somebody else's project. Materials and mobilization come out of their money, not yours. Then payments land at milestones you both agreed to before anybody picked up a tool, so unpaid work never accumulates into a number big enough to fight about.
This is the whole game. A contractor with a deposit policy and milestone billing has a fundamentally different aging report than one who invoices at the end and hopes.
2. Terms in plain English on the document they sign.
Due date. What happens after the due date. What a change order costs. What happens if the job stops for reasons outside your control. Not buried in fine print, and not in language nobody reads. Six clear sentences on the estimate does more work than any collections process.
If you do not have that language, there is a free generator for the terms and the deposit wording on this site, and another one for late payment language. Take what they give you to an attorney once for your state and then you have it forever.
Then chase properly
Once the front end is fixed, the chasing gets simple, because there is much less of it.
Same schedule for everybody, no exceptions and no emotion. A reminder the day it is due. Another at seven days with the invoice attached again, because half the time it genuinely got lost. A phone call at fourteen. A written notice at thirty that references the terms they signed.
Automate the first two. Nobody should be manually sending a seven-day reminder in 2026, and a system that sends it on time is not embarrassed to.
The customer you have to stop taking
There is usually one. Sometimes two. They are pleasant, they give you steady work, and they pay when they feel like it.
Run the calculator, then look at what share of that total is theirs. That is what their business actually costs you. Nine times out of ten you either put them on prepay or you let somebody else carry them, and the year gets better either way.
A note on the legal side
I am not a lawyer and none of this is legal advice. Lien deadlines, deposit caps and late fee limits vary by state and some of them are unforgiving. Spend one hour with a construction attorney in your state, set your paperwork up right once, and stop improvising it per job.
Questions people actually ask
Can I charge late fees?
Generally yes if it is written into the contract or estimate the customer accepted, and if the rate is within what your state allows. A late fee nobody agreed to in advance is very hard to collect and can hurt you in a dispute. Put it in the estimate, not in the reminder email. This is general information, not legal advice, and it is worth having a local attorney look at your terms once.
How big should a deposit be?
Enough to cover materials and mobilization so you are never funding somebody else's project out of pocket. What is customary varies by trade and by state, and some states cap deposits on certain residential work, so check yours before you set a policy.
When should I file a lien?
Mechanics lien rules are strict, deadlines are short and they vary a lot by state, including preliminary notice requirements you may have to send at the start of a job. If you do commercial or larger residential work, talk to a construction attorney once and set up your process around your state's deadlines rather than improvising per job.
Should I stop working for a customer who owes me?
Read your contract before you walk off a job, because stopping work can put you in breach depending on how it is written. The safer version is a payment schedule tied to milestones from the start, so unpaid work never gets big enough to be the question.