You're 120 Days Overdue from Your Biggest Customer. Here's the Collections Playbook (and When to Stop Chasing)

If this is you

You invoiced $80K to your biggest customer 120 days ago. You've emailed twice. You called once. Their AP department keeps saying "next week." Now it's threatening payroll. You're not sure whether to keep being polite or call a lawyer.

This post is for that exact moment.

Most contractors enter their first 120-day-overdue situation thinking the customer is good for it. Some are. Many aren't. The math is brutal: construction bad debt runs 1.5-3% of credit sales — per Level Index data on 2,200+ service businesses across the industry. On a $10M contractor, that's $150-300K written off every year. Most of that loss happens because escalation started too late.

This is the playbook for handling a 120-day-overdue invoice. The escalation timeline that actually works, the point where you stop being a vendor and start being a creditor, and what to do when it's clear they won't pay.

The math that should change how you treat overdue AR

Most owners think collection is about pressure: keep emailing, keep calling, eventually they pay. The data says it's about timing.

Collection probability — the percentage of dollars you'll eventually recover — drops sharply with age:

30 days past due: 94% — almost everything gets collected if you actually escalate at this point
60 days past due: 84% — collection still likely, but starting to slip
90 days past due: 74% — one in four dollars is gone
180 days past due: 50%
12 months past due: 26% — three out of four dollars are uncollectible

The sharp drop happens between 30 and 90 days. By the time you've decided to "really get serious about collections" at 90+ days, you've already lost 20 cents of every dollar in expected recovery.

The contractors with the best cash positions don't have better customers. They have a written escalation cadence and someone whose job is to follow it. They escalate at 30 days, not 90.

The 7-day → 30-day → 60-day → 90-day → 120-day escalation cadence

What good looks like:

Day 1: Invoice

Sent the same day work completes (or progress-bill before). Speed at this step matters more than people realize. The fastest contractors invoice same-day or progress-bill. The slowest wait two weeks. Two weeks of you financing your customer's project, every job.

Day 7: Automated reminder

Polite, just-the-facts. "Hi, just confirming you received invoice #123 for $80K. Let me know if there's anything blocking payment." Most invoices get paid here without further follow-up. This isn't pressure — it's checking the package arrived.

Day 14: Personal touch from accounting

Phone call, not email. Confirm receipt. Ask if there's anything blocking payment — a missing waiver, an expired COI, a PO discrepancy. Most stuck invoices stuck because of compliance gaps, not refusal to pay. You only find that out by calling.

Day 30: Owner-to-owner escalation

This is the step most contractors skip. By 30 days past due, the AP clerk has triaged your invoice somewhere it isn't getting paid. Email or call the owner / the GC project manager / whoever signed the contract. Subject line: "Past due invoice — quick question." Not threatening. But personal and direct.

The data is clear: contractors who escalate at day 30 collect ~94% eventually. Those who wait until day 90 collect ~74%. The 20-point gap between these two collection rates is more valuable than any sales commission you'll pay this year.

Day 60: Formal demand letter, payment plan, or finance-charge invocation

At 60 days past due, polite-and-personal stops working. Time for a formal letter. Three options, depending on your read of the customer:

Payment plan: "We can work with you on a 60-90 day plan if cash is tight. Send us a proposal by Friday." Use this if they're stalling because they're broke, not refusing.
Finance charge: Most state laws and well-written contracts allow 1.5%/month (18% APR) on past-due commercial invoices. Invoke it. The revenue isn't the point — it's signaling that this is now a serious issue.
Formal demand: A letter, not an email. Certified mail. References the contract, the invoice, the dates, and a deadline. "Payment is required by [specific date] to avoid further escalation."

Day 90: Decide — escalate or write down

At 90 days, you're at a fork. Decision criteria:

Escalate if:

Contract value is meaningful (typically $25K+ for it to be worth the cost of formal collection)
You have lien rights still in window (state-specific — usually 90-120 days from last work)
Customer is solvent (you'd see them buying ads, hiring, etc.)
You're willing to lose the customer relationship

Write down if:

Amount is small relative to the cost of collection
Lien window has closed
Customer is genuinely bankrupt or near-bankrupt
You'd lose more in lost future business than the unpaid invoice

The mistake most contractors make: they wait at this step. They don't decide. The invoice ages another 90 days, and now they're at day 180 with collection probability at 50%.

Day 120+: Lien rights, collections agency, or legal

If you decided to escalate at day 90 and still no payment, this is where you actually do it.

File a mechanic's lien if you're still in the lien window (this varies by state — check your state's deadlines). A lien attaches to the property. It's the most powerful tool a contractor has.
Engage a collections agency if amount is between $5K-$50K. They typically take 25-50% of recovered funds, but they get paid for results. Better than $0 from your side.
File a small-claims suit if amount is under your state's small-claims threshold (usually $5-15K depending on state). DIY-able.
Hire a collections attorney if amount is meaningful ($50K+) and customer is solvent. Demand letter from a lawyer often produces payment without further legal action.

The thing nobody tells contractors: at this stage, you're playing for partial recovery, not full. Anything 100% is a win. Don't let perfect be the enemy of recovered.

Free profitability audit

Stop letting cash sit in someone else's bank account.

We benchmark your books against 2,200+ service businesses and tell you exactly where the money is going.

When to stop chasing

There's a point where continuing to chase costs you more than writing off. The signals:

Customer has stopped responding entirely (not even AP emails)
Customer has filed bankruptcy or you've heard credible rumors of insolvency
Lien window has closed and customer's property isn't accessible
Cost of collection (legal fees, your time) exceeds 30% of the invoice
The relationship is dead and pursuing further harms your reputation in the local market

Write the invoice off as bad debt. Document the loss for tax purposes. Move on. Sitting with a dead invoice on your AR aging report makes your DSO look worse and uses up mental cycles you could spend collecting from the rest of your customers.

The customer-fire decision

A separate question: even if this customer eventually pays, do you keep doing business with them?

Run the math. Add up:

Days outstanding multiplied by your cost of capital (typically 8% APR, so ~$22 per $1K per year)
Time your team spent chasing (your accounting team's hourly cost)
Your time (probably $200-400/hour fully loaded)
Stress tax (real, hard to quantify, but real)

For a $80K invoice that took 150 days to collect, your direct cost is roughly:

Float cost: $80K × 8% × (150/365) = $2,630
Team time chasing: probably $1,500-3,000
Owner time: probably $1,500-3,000
Total: $5,500-8,600 of cost on a $80K invoice

That's 7-11% of your "profit" from that customer, eaten by collection cost. If your gross margin on the work was 30%, you actually netted 19-23% — barely break-even after all the time tied up.

Some "good customers" aren't. Run this math on your top 5 slow-paying customers. You may find your worst-paying customer is a worse business than your best-paying mid-size customer, even though revenue says the opposite.

Diagnostic close

The collections cadence above is the playbook. Implementing it requires three things:

A weekly AR aging report — every Monday morning, in front of the person who owns collections
An escalation trigger system — automated reminders at day 7 and 14, manual escalation at days 30/60/90/120
Clear ownership — who calls, who signs the demand letter, who files the lien

If your current AR aging is older than weekly, or you don't have a written escalation cadence, or nobody owns collections, you have a process problem. Not a customer problem.

The fix usually takes 30 days to implement and pays for itself within 90.

Run the 30-minute collections audit on your own AR — see how much cash is past due, where it's stuck, and what your collection rate looks like compared to 587 contractors in our dataset — per Level Index data on 2,200+ service businesses. Or book a free 30-min audit and we'll rebuild your collections process with you.

Stop letting cash sit in someone else's bank account.

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