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 on net-30 terms, and the invoice is now 120 days past its due date (150 days since you sent it). 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.

The short answer

Use a written collections cadence, but let contract terms, state-specific legal deadlines and the actual invoice exception determine escalation. The timing below is a working process, not a measured recovery-rate experiment.

Key takeaways

Confirm receipt and missing documentation early; assign an owner for disputed or overdue invoices.
Record lien and preliminary-notice deadlines when the project starts. Do not wait for day 90 or 120 to discover a shorter deadline.
Illustrative total carrying and chasing cost on an $80K invoice held 150 days is $5,630-$8,630 using 8% financing and the stated time-cost assumptions, about 7-11% of the invoice or 23-36% of a $24K gross-profit pool.
Evaluate likely net recovery, solvency and legal options before continuing work, agreeing terms or recording a write-down.

This post is for that exact moment.

The working assumption that a longstanding customer will eventually pay needs testing. Separate an administrative exception (missing waiver, receipt, PO or invoice route) from a genuine dispute, cash shortage or insolvency. The response and evidence are different in each case.

The math that should change how you treat overdue AR

Invoice age is a useful warning flag, but it does not itself prove a particular recovery probability or that one escalation date causes a better result. The earlier age-based recovery ladder is not supported by a retained source or Level cohort and should not be used to value receivables.

Build your own view from original due dates, balances, subsequent receipts, disputes, credits and write-offs. Keep the same observation window for each age bucket and include still-open invoices rather than quietly dropping them. Historical recovery by age is an association, not a randomized test of follow-up timing.

What's your AR actually worth? Open the DSO Calculator and enter your annual revenue and current AR balance. Use it to estimate DSO from those two inputs. DSO is a balance-timing measure. It does not value individual aging buckets or predict recovery. This article cites no measured trade-specific DSO percentile, so treat any comparison the calculator displays as context, not a target for your trade.

Use a written cadence and someone accountable for exceptions. This is a recommended operating control, not a measured comparison of the best and worst contractors.

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

What good looks like, as a recommended operating cadence rather than a measured experiment. Day 1 to Day 14 count from the invoice date. Day 30 onward count from the contractual due date, so on net-30 terms "Day 30 past due" is 60 days after the invoice. Any contract notice, dispute, lien or bond deadline that falls earlier controls.

Day 1: Invoice

Sent the same day work completes (or progress-bill before). Speed at this step matters more than people realize. In the Level Index billing-speed metric (733 companies across trades, days from job completion to invoice issued), the median is 1 day when progress billing is included. Among post-completion invoicers the median is 7 days. Across the full 733-company sample, the slowest tenth take about 30 days or longer. That sample is cross-trade, not a separately measured commercial subset. Later invoicing can delay when payment terms start; funding effects depend on actual costs, progress payments and contract milestones.

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." This check can reveal missing delivery or documentation; no recovery percentage is established here. 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. Check for compliance gaps before assuming refusal to pay. You only find that out by calling.

Day 30: Owner-to-owner escalation

This step is easy to skip. By 30 days past due, the invoice may be stuck in an approval queue, a dispute file or a cash-management hold that the AP clerk cannot release. 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.

Day 30 is an internal review trigger. Confirm the due date, current exception and responsible decision maker, then agree a documented next step. No retained dataset here measures a causal recovery gain from this trigger.

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

At 60 days past due without a documented exception or agreed payment date, move to a formal letter. First check the contract for required notice, dispute-resolution or claim procedures and their deadlines. Those steps can be conditions to later remedies. 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: Invoke a late charge only if the signed terms provide for it and applicable law permits the amount. Verify the state and transaction-specific requirements; 1.5% per month is not a universal entitlement. 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:

Expected collections after settlement exceed the fees and the value of your time, counting each cost once (a retained illustrative planning screen is an unpaid balance of $25K+; replace it with an actual quote and recovery estimate)
You have lien rights still in window (state and project-specific; verify the actual filing, notice and enforcement deadlines with counsel)
Assess customer solvency from available financial and payment evidence; advertising or hiring alone does not prove it
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 can age another 90 days without a plan. That is a process failure, not evidence of a particular recovery probability.

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

Legal deadlines can require action much earlier. Use this late-stage review only if counsel confirms the relevant rights remain available; an internal cadence must never override a statutory date.

File a mechanic's lien if you're still in the lien window (this varies by state, check your state's deadlines). On private projects a lien can attach to the property if statutory requirements are met. Public projects generally call for payment-bond remedies instead.
Engage a collections agency for balances where a contingency fee still leaves an acceptable net recovery. Get written fee terms; this article supplies no measured fee range. Net recovery is the amount collected minus the fee. For example, an illustrative 30% fee on a $20K recovery nets $14K. They get paid for results, and a partial recovery can still beat $0.
File a small-claims suit if the amount is under your state's small-claims limit. Limits, and rules on business claimants and representation, vary by state. Check the current court rules before choosing this route.
Hire a collections attorney when the amount justifies quoted fees (an illustrative screen is $50K+) and the customer appears solvent. An attorney demand letter may produce payment or a negotiated plan; no success rate is claimed here.

At this stage, plan for the possibility of partial recovery. Estimate the settlement amount likely to be collected, then subtract agency or legal fees and the opportunity cost of your time once. For a fictional $40K settlement with $10K total collection cost, net recovery is $30K. Compare that with the alternatives rather than subtracting the settlement discount again.

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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 (the automatic stay generally halts collection activity, so stop direct collection and ask counsel about filing a claim), or you have credible evidence of insolvency
Lien window has closed and customer's property isn't accessible
The estimated amount collectable after settlement is less than fees plus the opportunity cost of your time. Costs above 30% of the invoice are a planning example, not a universal cutoff. Compare your actual recovery estimate with the fees and time involved.
The relationship is dead and pursuing further harms your reputation in the local market

Discuss the accounting write-down and tax treatment with your adviser; a cash-method business generally cannot deduct an unpaid invoice as bad debt if it never recognized that revenue. A write-down does not automatically abandon legal rights. See IRS bad-debt guidance. 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 (use your actual financing rate; an illustrative 8% APR is $80 per $1K per year)
Time your team spent chasing (your accounting team's hourly cost)
Your time (an illustrative assumption of $200-400/hour; use your own opportunity cost)
Stress tax (real, hard to quantify, but real)

For a $80K invoice that took 150 days to collect, your illustrative carrying and chasing cost is roughly:

Float cost: $80K × 8% × (150/365) = $2,630, including about $526 for the normal 30-day terms and $2,104 for the additional 120 days
Team time chasing: assumed $1,500-3,000
Owner time: assumed $1,500-3,000
Total: $5,630-8,630 of illustrative cost on a $80K invoice

That is about 7-11% of the invoice, or 23-36% of its assumed $24K gross profit at a 30% margin. The time costs are illustrative economic costs; do not subtract them again if those same wages are already allocated in your P&L. This is not a net-profit or break-even conclusion.

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: an automated reminder at day 7, a personal call at day 14, manual escalation at days 30/60/90/120 past due, and calendar entries for every contract notice, lien and bond deadline
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 to fix, whether or not this customer also has a payment problem.

Measure the change through resolved exceptions, subsequent cash, collection cost and overdue balances. This article supplies no measured 30-day implementation or 90-day payback promise.

Run the collections gap check on your own AR and compare your collection rate (cash collected as a share of billed revenue) with 464 contractors in our dataset, per Level Index published metric (see its eligible sample and definition). That cross-trade sample has a median of 85.1% and a 75th percentile of 92.7%. The gap to a higher percentile is not all recoverable cash: timing, retainage, credits, disputes and true bad debt all sit inside it. Or book a free 30-min audit and we'll review your collections process with you.

Before you buy AR automation

Collections software works on the data it is given. If your AR aging is wrong upstream, automation sends the wrong reminder faster, which is covered in Why an Integration Does Not Finish the Close.

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