Past due invoices, from the first reminder to the write-off
An unpaid invoice ends one of two ways, and both of them change your books. The escalation sequence with wording and timing, the point where a receivable becomes bad debt, and the entry that closes it out.
On an accrual method a past due invoice is revenue you already recorded and already reported, so no reminder email changes your profit, your balance sheet or your tax position; only the money arriving or a write-off does.
A business on the cash method generally cannot deduct an uncollectible invoice as a bad debt, because the amount was never included in income in the first place, and IRS Topic no. 453 gives the deduction to accrual-method taxpayers who already reported the amount.
Writing off an unpaid invoice removes the receivable and records a bad debt expense in the month you decide the debt is worthless, leaving the month you earned the revenue untouched, which is why deleting the original invoice is the wrong fix.
A past due invoice is one whose due date has gone by unpaid, and it ends in one of two places: the money arrives, or you write it off. Everything in between is escalation. What almost nobody says out loud is that the invoice is already in your books, already in the profit you reported for that month, and no reminder email changes either of those things.
The wording is below, as a table of what to say and when. The rest of this is the part the reminder templates leave out: what the invoice is doing to your numbers while it sits there, the point at which a receivable stops being one, and the entry that closes it out.
What is a past due invoice doing to your books while you chase it?
If you are on an accrual method, all of it is already counted. The revenue went in the day you raised the invoice, the profit for that month already includes it, and the amount is on your balance sheet as a receivable, which is why the balance sheet can read healthier than the bank account does.
IRS Publication 538, Accounting Periods and Methods, revised January 2022, states that under an accrual method you generally report income in the year it is earned, and that you include an amount in gross income for the tax year in which all events have occurred that fix your right to receive it and you can determine the amount with reasonable accuracy. Being paid is not one of those events.
Take an $8,500 invoice for a project delivered on April 14, sent on net 30, still unpaid on September 30. April’s revenue is $8,500 higher because of it. April’s profit is $8,500 higher. The tax position for that year already reflects it. And $8,500 of what is on today’s balance sheet is that one invoice, sitting there as an asset for as long as nobody decides otherwise. The day it became past due was set by the payment term you put on the invoice and by nothing else.
A reminder email changes what your customer does. It does not change a single number in your books. Only two things do: the money arriving, or you deciding it never will.
None of that is an argument for chasing harder. It is the reason the chase has to end somewhere, on a date, with a decision. An invoice you keep meaning to deal with is an asset you are carrying and a profit figure you are steering by, and both of them go on being slightly wrong for as long as nobody decides. This is also the gap that makes owners distrust their own reports, and it is worth knowing which statement answers which question before concluding that either one is lying to you.
How do you chase a past due invoice, step by step?
In a fixed order, beginning before the due date and ending on a date you set in advance rather than one you drift into. Six steps, and the last one is the only one that is not a message.
Check the invoice before you chase it. Some of what sits in a past due column cannot be collected because there is nothing to collect. Confirm the invoice was actually sent, that it went to whoever pays rather than whoever hired you, that it carries whatever purchase order or reference number the customer’s system requires, and that no payment or credit memo is sitting unapplied against it. This is also where duplicates surface. Sorting the aging report before you read it is the same job at a larger scale, and it is where these invoices show up long before they reach 90 days.
Send the first reminder the day after the due date. Same email thread as the original invoice, invoice attached again, two sentences. Sending it the day after, rather than two weeks later, is what keeps the reminder ordinary instead of pointed.
Ask for a date, not for payment. “When can I expect this?” produces something you can write in a diary. “Please pay at your earliest convenience” produces nothing, and you will be back in the same place in three weeks with no record of having asked.
Call the person who actually pays. Around day 30, and to the accounts contact rather than the person who hired you. Most of what stops an invoice is mechanical: it never reached the payables inbox, it is missing a reference the system requires, or it is in an approval queue behind someone on leave. A phone call finds that out in four minutes, and a fifth email never will.
Put it in writing, by something that produces proof of delivery. Around day 45 to 60. A statement of account listing every open invoice, the total, and a date by which you need an answer. Two things happen here at once: the customer gets an unambiguous version of the position, and you get dated evidence of having asked, which matters later for reasons that have nothing to do with collections.
Decide on the date you set, not when you run out of patience. Four outcomes are available: the money arrives, you agree a payment plan and it starts, you hand the debt to someone whose job it is to collect, or you write it off. Whichever it is, it happens on a date and it gets recorded.
Step 6 is the one nobody writes down, and it is the one that turns this from a habit into a sequence. Pick the date at step 1, while the invoice is in front of you, and put it in the calendar. Deciding in advance when you will stop is the difference between an invoice that has an answer and one that is still in the 90-plus column next April.
What do you say at each stage, and when do you say it?
Each stage has one job, and the message is short enough to be read on a phone. The fourth column is the one the reminder-template pages do not have, and it is the reason this is a bookkeeping question as well as a collections one.
When | What this message is for | What it says | What it changes in your books |
|---|---|---|---|
Three days before the due date | Confirming the invoice exists in their system, before there is anything to argue about | The invoice number, the amount, the due date, and one question: is anything else needed to get it approved? | Nothing. The invoice is current |
The day after the due date | A first reminder that reads as administrative rather than pointed | The invoice is now past its due date, here it is again, and the payment details | The invoice moves out of current and into the first past-due bucket on the aging report |
Day 14 | Getting a date rather than a promise | A direct ask: what date will this be paid? | Note the promised date against the invoice, so the next step is triggered by something rather than by mood |
Day 30, by phone | Finding out what is actually blocking it | Not a message. A call to the accounts contact asking where the invoice is in their process | Record the call, the name and the date. This is the first entry in the collection record |
Day 45 to 60, in writing with proof of delivery | Making the position unambiguous and creating dated evidence | A statement of account: every open invoice, the total, and a date by which you need an answer | The collection record now has a document in it, not just emails |
Day 90 | The last message before the decision | The amount, the history, what happens next, and the date after which you will treat it as uncollectible | Nothing yet. Ninety days is a prompt to look, not a verdict |
The date you set at step 1 | Not a message. The decision | Collected, on a plan, handed over, or written off | One of two entries: cash against the invoice, or the write-off |
Two things stay out of every one of those messages. A late fee you did not agree in the contract, because inventing one at day 45 is not enforceable and putting it on the invoice inflates both your revenue and your receivables. And any threat you are not going to carry out, because the day 90 message is worth something only if the date in it is real.
Open the invoice you are chasing and write two dates on it: the day you will call the person who actually pays, and the day you will stop chasing and decide. Put both in your calendar now, while you are looking at it. The second date is the one that matters, because it is the only thing that turns an invoice you keep meaning to deal with into one that has an answer.
When does a past due invoice stop being a receivable and become bad debt?
When there is no reasonable expectation of being paid, and you can show what you did to find that out. IRS Topic no. 453, Bad debt deduction, read in September 2026, states that a debt becomes worthless when the surrounding facts and circumstances indicate there is no reasonable expectation that the debt will be repaid, and that to show a debt is worthless you must establish that you have taken reasonable steps to collect it.
Notice what is not in that test. Not a number of days, not a bucket on a report, and not a policy you set yourself. Ninety days past due is a prompt to look at the invoice properly. It is not the answer, and an invoice from a customer who is paying you $2,000 a month on a plan is not worthless at 200 days.
Facts and circumstances, in practice, look like this: the customer has stopped trading, or the debt is disputed and you have decided not to pursue it, or the letters come back and the phone is dead, or what it would cost to pursue the amount is more than the amount. Each of those is something you can point at afterward and say when you knew it. That is the difference between a judgment and a feeling, and it is the whole of why step 5 exists.
The write-off decision itself has a tax year attached to it, and that makes it a filing position rather than a bookkeeping one. Work out which invoices in the column are real, write down what you did to collect each one and when, and take that list to whoever files your return. The bookkeeping side is deciding what is true. The return is a different question and it is theirs.
Can you deduct an unpaid invoice as a bad debt?
Only if you already reported the income, which in practice means only if you are on an accrual method. A business on the cash method generally cannot deduct an uncollectible invoice as a bad debt, because the amount was never included in income in the first place. IRS Topic no. 453, read in September 2026, states that you may deduct business bad debts, in full or in part, only if the amount you were owed is included in your gross income in the current or prior year, and that a cash method taxpayer generally cannot take a bad debt deduction for unpaid fees, rents, interest and similar items, because those amounts were never included in income. Its own example is an architect on the cash basis whose client does not pay: no deduction, because the fee was never income.
Stated the way round that is actually useful: on the cash method, not being paid is the entire tax effect. You never counted the money, so you were never taxed on it, and there is nothing left to deduct. On an accrual method you were taxed on it, and the deduction exists to undo an inclusion you already made.
Cash method | Accrual method | |
|---|---|---|
When you raised the invoice | Nothing happened to income. Income is recorded when the money arrives | The revenue was recorded and reported. IRS Publication 538 puts it in the year it is earned |
When the invoice goes bad | Nothing to deduct. The amount was never in income | A business bad debt deduction is available, per IRS Topic no. 453, because the amount was previously included in income |
What the write-off is doing | Correcting the books, if a receivable was ever recorded at all | Correcting the books and reversing an inclusion |
Where the relief already happened | In the income you never reported | In the deduction, in the year the debt becomes worthless |
Two more things worth carrying. A business bad debt can be deducted in full or in part, which Topic no. 453 distinguishes from a nonbusiness bad debt, and a nonbusiness one has to be totally worthless before any of it is deductible. And IRS Publication 334, Tax Guide for Small Business, 2025 edition, states the accrual-side rule in the same terms: you can claim a bad debt deduction for an uncollectible receivable only if you previously included the uncollectible amount in income.
One note on where to read this, because a stale citation circulates. Publication 535, Business Expenses, was retired in 2022 and will not be revised or published again; the IRS’s own page for it says so, and its bad debts material was incorporated into the Bad Debts section in chapter 8 of Publication 334. If you have been sent to Publication 535 for this, that is why the page has stopped moving.
What does writing off an unpaid invoice do to your books?
It takes the receivable off the balance sheet and puts a bad debt expense on the income statement, in the month you decide the debt is worthless. It does not touch the month you earned the revenue.
Back to the $8,500 invoice. You raised it in April and you decide in October that it is not coming. Accounts receivable falls by $8,500 and bad debt expense of $8,500 lands in October. April keeps its revenue and keeps its profit, because April is what actually happened in April. October carries the loss, because October is when you learned something. Publication 334’s bad debts section describes this as the specific charge-off method, used for both partly and totally worthless business debts, and the phrase is literal: the debt is charged off in your books, and the entry is part of the thing rather than paperwork after it.
The wrong fix is the common one, so it is worth naming. Deleting the original invoice makes the aging report look clean and removes $8,500 of revenue from April, which is a month you have already closed, already reported on, and possibly already filed a return covering. It also destroys the record that the work was done and billed, which is the evidence behind everything else in this article. Write it off. Do not delete it.
There are exactly two ways this ends, and they are not the same amount of work.
Collected | Written off | |
|---|---|---|
What happens to cash | It goes up by the invoice amount | Nothing. It never arrives |
What happens to accounts receivable | Falls by the invoice amount | Falls by the invoice amount |
What happens to revenue | Nothing. It was recorded when you invoiced | Nothing. It stays in the month you earned it |
What happens to profit | Nothing in the current month | Falls in the current month, by the amount written off |
What the aging report shows afterward | The invoice is gone from every bucket | The invoice is gone from every bucket |
What is on the return | Nothing new | A business bad debt deduction if you are on an accrual method and already reported the income. Nothing, on the cash method |
How you know you are done | The bank shows the money and the invoice is closed | The invoice is closed, the write-off carries the date you decided, and the collection record is filed with it |
Read the fifth row across and you have the reason the two exits get confused. The aging report looks identical either way, which is exactly why it cannot be the thing that tells you the job is finished.
What happens if the customer pays after you have written the invoice off?
The money comes in as income in the year you receive it, rather than going back to the month you originally earned it. IRS Publication 334, 2025 edition, states that if you claim a deduction for a bad debt and later recover all or part of it, you may have to include all or part of the recovery in gross income, and that the amount you include is limited to the amount you actually deducted.
In the books it is the mirror of the write-off, dated the day the money arrived. Do not reopen the month you closed, and do not raise the invoice again: the original revenue is already recorded in April and raising a second invoice would count the same work twice. If a partial payment turns up on a debt written off in full, the recovery is the amount that turned up, not the amount you wrote off.
This is also the practical argument for keeping the collection record with the write-off rather than throwing it away once the invoice is closed. A payment landing eleven months later with no reference on it is very hard to explain if the only trace of the original debt is a number in an expense account.
How do I write a past due invoice email?
Short, on the original email thread, with the invoice attached again and one question in it. A first reminder that runs longer than four sentences reads as a complaint, and a complaint is harder for the person receiving it to forward to the person who can actually pay you.
Six things belong in it, and they fit in those four sentences: the invoice number, the amount, the due date that has passed, the payment methods and any reference the payer needs to quote, one direct question asking what date the payment will be made, and your name. Something as plain as “Invoice 1042 for $8,500 was due on May 14 and is showing as unpaid at our end. I have attached it again. What date should I expect payment?” does the whole job.
What to leave out matters as much. No apology for chasing, because the work was done and the invoice is due. No late fee that is not already in the contract. And no accusation, because at the day-one stage the overwhelmingly likely explanation is that the invoice is stuck somewhere administrative rather than being refused.
Can I charge a late fee on an overdue invoice?
Only if the contract you agreed with that customer creates one. A late fee is not an entitlement that arises because an invoice went unpaid, and printing a percentage at the bottom of an invoice does not create an agreement. If the fee was not agreed before the work, the invoice is the first the customer has heard of it.
No percentage appears here on purpose. What a business may charge, and any ceiling on it, is a matter of state contract law, and no federal agency has authority over that, so a single national number is not a thing that exists to be quoted. Before writing a late fee into your standard terms, that is a question for a lawyer in your state rather than a figure copied off somebody else’s invoice.
The bookkeeping side is simpler than the legal one. A late fee nobody has agreed to and nobody has paid is not revenue. Adding it to the open invoice raises both your revenue and your receivables on the strength of an argument you have not had yet, and it makes the aging report show a debt larger than the one you could actually collect. Record what was invoiced and what was collected, and keep the argument about the fee separate from what the books say happened.
When should I write off an unpaid invoice as bad debt?
When there is no reasonable expectation of repayment, you can show what you did to establish that, and you have confirmed the invoice is a real debt rather than a bookkeeping artifact. Those three in that order, because the third one is the one people skip.
A useful practical trigger, which is not a rule and does not appear in any tax guidance: compare the oldest column of your aging report at two consecutive month-ends. If the total is the same and it is the same invoices behind it, the report has stopped telling you about collections and has started telling you about your balance sheet. That is the point to look properly, not the point to write off.
Timing carries a consequence worth knowing before you decide. A business bad debt is deductible in the year the debt becomes worthless, so the year in which you conclude it is worthless is part of the decision rather than an administrative detail, and that is precisely why it belongs with whoever files your return rather than with the aging report.
What is the difference between past due and overdue?
Nothing, in ordinary business use. Both describe an invoice whose due date has passed without payment, and no accounting standard or tax rule assigns them different meanings. If a customer’s accounts department uses one and you use the other, you are talking about the same invoice.
The distinction that does carry meaning in your books is between outstanding and past due. An outstanding invoice is one that has been raised and not yet paid, whether or not the due date has arrived. A past due invoice is one whose due date has gone by. That is the line an accounts receivable aging report draws, because it ages invoices by due date rather than by invoice date, which is why two invoices sent on the same Monday on different terms sit in different columns six weeks later with nothing having happened to either.
Books that agree with what actually got collected
If you have written invoices off this year, or are about to, the questions that follow are bookkeeping ones: which month the loss belongs in, what the receivables line should say afterward, and whether the two agree. That is worth talking through once rather than working out again every quarter.
This article explains how the rules generally work. It is not tax advice for your situation.
Operations background across retail, property management, and e-commerce. Writes step-by-step guides for owners who need the answer, not the theory.
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