What Are Late Payers Costing You?
The job is done, the invoice is out, and the money is sitting in someone else's account while you cover materials and wages from an overdraft. Here is what that costs each month, and what getting paid faster would be worth.
Use the figures from your accounting software or your last statement run. Nothing is sent anywhere.
Unpaid Invoice Cost Calculator
Use your debtors report. Nothing is sent to us.
Past their due date, not just unpaid.
Days past the due date, averaged across the overdue invoices.
The rate on whatever covers the gap. Zero if there is no cost.
Calls, texts, emails and looking things up.
What that chasing time is worth.
Your own estimate. Cannot exceed the average days overdue.
Finance cost on the overdue balance plus the time you spend chasing it.
An estimate from your own figures, not financial advice. It assumes the overdue balance and the chasing time shrink in proportion to the reduction in days overdue, which you set yourself. It does not count invoices that are never paid at all.
What the Numbers Mean
Three figures: the cash you are waiting on, what waiting costs you every month, and what cutting the wait by a set number of days would be worth.
Cash tied up
Invoices outstanding multiplied by their average value. This is money you have already earned and already spent on materials and labour, but cannot use. For most trade businesses it is the single biggest thing standing between a good month and a good bank balance.
Monthly cost of late payment
Two parts. The finance cost of carrying that balance on an overdraft or credit card, at the annual rate you set, spread over the month. Plus the hours you spend chasing, valued at your hourly rate, because time on the phone to a slow payer is time not billed to anyone.
Value of automated reminders
If every invoice were paid a set number of days sooner, the overdue balance shrinks in proportion and the chasing time shrinks with it. The calculator shows the cash released and the monthly saving for the reduction you choose. You set the days; the calculator does not assume a result.
How the Cost Is Worked Out
Four steps you can check against your debtors report. The reminder figure uses a reduction in days that you choose, not a promised outcome.
Cash tied up
Invoices outstanding multiplied by the average invoice value. This is the balance you are carrying at any given time.
Finance cost per month
Cash tied up multiplied by your annual finance rate, divided by twelve. If you fund the gap from savings, use the interest you would otherwise earn.
Chasing cost per month
Hours per month spent chasing, multiplied by your hourly rate. Added to the finance cost to give the monthly cost of late payment.
Value of paying sooner
With a steady flow of invoices, the overdue balance is proportional to the average days overdue. Cutting those days by the amount you set shrinks the balance, the finance cost and the chasing time by the same share.
Why Trade Invoices Get Paid Late
Three causes that account for most late payment in small trade businesses, and what fixes each one.
The invoice goes out late
If the invoice is sent a week after the job, the customer's clock starts a week late too. Add the payment terms and the money arrives a fortnight after it could have. Invoicing on the day, from the driveway, before the next job, is the cheapest cash-flow improvement available and it costs nothing.
- Invoice from your phone before you leave the site
- Have the customer's email and mobile before the job starts
- For bigger jobs, invoice in stages rather than at the end
- Put your payment terms and bank details on every invoice
Nobody reminds them
Most late payment is not refusal, it is forgetting. The invoice lands in an inbox, gets buried, and stays unpaid until someone mentions it. A reminder on the due date and another a week later, sent automatically, catches most of these without a single awkward phone call.
- A reminder the day before the due date, not a week after
- A second reminder a week overdue, with a link to pay
- A phone call only once the reminders have gone unanswered
- The same sequence for every customer, without exception
Paying is hard
An invoice that requires the customer to open internet banking, type in a BSB and account number and reference the invoice correctly is easy to put off. A link that lets them pay by card in thirty seconds gets paid while they are still looking at it. Card fees are usually small compared with the finance cost of waiting.
- Put a pay-now link on the invoice and on every reminder
- Take a deposit before the job starts on anything large
- Offer card payment on site for smaller jobs
- Make the bank details easy to copy for customers who prefer transfer
Next Steps
Tradie Cash Flow Health Scorecard
Eight questions that show which part of your invoicing and payment process is letting the cash out.
Score your cash flow →Tradie Business Admin Audit
Chasing invoices is one admin job of many. See what the rest are costing you.
Audit your admin →Best Job Management Software for Tradies
Most job management tools send invoices and reminders for you. Compare the options.
Compare software →Frequently Asked Questions
What should I put in for the finance rate?
The annual interest rate on whatever covers the gap while you wait to be paid. For most small trade businesses that is a business overdraft, a credit card or a line of credit; use the rate on your statement. If you fund it from your own savings, use the interest you would have earned on that money instead. If you genuinely have no cost of carrying the balance, set it to zero and the calculator will only count your chasing time.
How many days will automated reminders actually save?
The calculator does not know, which is why the reduction is a slider rather than a fixed figure. It depends on why your customers pay late. If most of them simply forget, a reminder on the due date and a payment link make a large difference. If your customers are builders or agents with their own payment runs, reminders help less and payment terms matter more. Start with a modest reduction, and replace it with your own measured figure once you have run reminders for a few months.
Why is chasing time counted at my hourly rate?
Because an hour on the phone to a slow payer is an hour you could have billed to a customer, or an hour of your evening you did not get back. Valuing it at your charge-out rate is the honest way to see what the chasing actually costs. If someone else in the business does the chasing, use their hourly cost instead.
Does the reduction assume the balance shrinks in proportion?
Yes, and that is the main assumption in the tool. With a roughly steady flow of invoices, the amount outstanding at any moment is proportional to how long each invoice takes to be paid. Halve the average days overdue and the overdue balance roughly halves. It is a simplification, but it is the standard way of relating collection time to the cash tied up, and it lets you see the effect of a change in days without guessing at dollars.
Should I charge interest or late fees on overdue invoices?
You can, if your terms say so before the work starts and the customer has agreed to them. In practice a late fee is more useful as a reason for people to pay on time than as income, and it is hard to collect from someone who is already not paying. Fix the invoicing speed, the reminders and the ease of paying first. Those move the number far more than a fee does.
Does this send my figures anywhere?
No. Everything is calculated in your browser and nothing is transmitted to us. Your slider positions are saved in your own browser so they are still there when you come back, and the reset button clears them. No sign-up and no email required.
Want the Reminders to Send Themselves?
You just put a monthly figure on late payment. Tell us how you invoice now and we will show you how reminders, payment links and follow-up calls can run without you touching them.