Published
The number most business owners never work out — and why it should change how fast you act
Cory Mayfield
6
min
At a Glance
Most business owners think about a late invoice in terms of the amount. The real cost — capital, time, recovery, and financing — is almost always several times higher than that number suggests.
Key takeaway: On a $50,000 invoice unpaid for 60 days, the combined capital cost, time cost, and recovery shortfall typically exceeds $3,000 — before a single commission or fee is paid.
The Capital Cost
Money sitting in an unpaid invoice is not available to your business. It cannot pay a supplier, fund new equipment, or cover payroll. It has a cost even when nothing obvious is happening.
At 10% annual cost of capital — lower than most business credit lines — $100,000 in unpaid invoices costs $833 every single month.
Receivables | Monthly Capital Cost |
|---|---|
$100,000 | $833 |
$250,000 | $2,083 |
$500,000 | $4,167 |
The Time Cost
Chasing payment is work. Real work. It takes time that could go toward winning new clients or doing actual work.
The average small business owner spends 10 hours a week on manual payment follow-up. At $50 an hour in opportunity cost, that is $500 a week — $26,000 a year — from one person alone.
The Recovery Cost
Here is the bit that gets most people. Recovery rates drop by about 1% every week after a payment is missed.
Days Overdue | Recovery Rate | Expected Value — $20K Invoice |
|---|---|---|
30 days | 30–50% | $6,000 – $10,000 |
60 days | 20–35% | $4,000 – $7,000 |
90 days | 15–25% | $3,000 – $5,000 |
180 days | 10–15% | $2,000 – $3,000 |
The Financing Cost
Invoice financing typically costs 2–5% a month. On a $100,000 portfolio, that is $2,000–$5,000 per month — paid to access money that should already be yours.
One electrical contractor using Chargetree reduced their average payment time by 18 days — saving roughly $45,000 in invoice financing costs in their first year. That was 3% of annual revenue.
The Opportunity Cost
A business owner spending 10 hours a week chasing payments is not spending those hours growing the business. When late payment becomes the norm, the whole business shifts into a reactive mode: plugging gaps instead of building momentum.
What to Do About It
Follow up within 24 hours of every missed payment.
Use automated reminders — 85% of payments come through without complaint.
Sort invoices by age, not amount. A 60-day invoice and a 10-day invoice for the same amount are very different problems.
Set clear payment terms at quote stage — not just on the invoice.
Build a fixed escalation schedule.
Frequently Asked Questions
How much does a late invoice actually cost a small business?
The cost goes well beyond the invoice amount. It includes capital cost (typically $833 per month per $100,000 at 10% annual rate), time cost ($150–$250 per invoice in manual follow-up), recovery shortfall from acting late, and potential financing costs. Combined, these can easily exceed 10–15% of the invoice value.
Is it worth chasing a small overdue invoice?
Yes — especially early. Even for smaller invoices ($500–$2,000), the cumulative impact of consistently delaying follow-up compounds across dozens of invoices. Automated follow-up makes chasing every invoice efficient regardless of size.
How long should I wait before following up on an overdue invoice in Australia?
You should follow up within 24 hours of a missed payment date — not after 7 or 14 days. Research shows 80% of payments are received within 24 hours of first automated engagement.
About Chargetree
Chargetree is an automated accounts receivable and collections platform built for Australian businesses. We help tradies, contractors, agencies, and service businesses get paid faster — without damaging client relationships. Chargetree integrates with Xero to automate payment reminders, escalation workflows, and collections from just $69 a month. No commissions. No lock-in. Learn more at chargetree.co.
Stop paying the hidden cost of late invoices.
Chargetree automates follow-up from the first missed payment so you recover faster and stop spending hours chasing. Flat monthly fee. No commissions.
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