Read by Denym Bird7 min
Summary
Late-paying customers show up early in invoice data: after one payment 1 to 7 days late, a customer's next invoice is on time 28 in 100 times, against 82 in 100 after an on-time payment, in Paidnice's analysis of invoice data from over 1,000 Paidnice customers. With 4 or more overdue invoices open, the next invoice is unpaid 26 in 100 times.
- The first invoice: Customers who pay their first invoice on time go on to pay 73 in 100 of their later invoices on time; if the first is 1 to 14 days late, 39 in 100.
- The first reminder: Customers who pay within 3 days of their first overdue reminder leave 2 in 100 later invoices unpaid; the rest leave 9 in 100.
- The concentration: Among customers with 5 or more invoices, 3 in 10 are late on 8 invoices in 10 or more, and they account for 71 in 100 of the invoices still unpaid at 75 days.
- The fix: Paidnice scores every customer from 0 to 100 on their payment history with you, so a late payer moves to a firmer reminder policy or an escalation before the next invoice goes out.
A customer paid last month’s invoice a week late, with an apology. This month’s invoice is due on Friday and you are deciding whether to send the next job out before it is paid. Nothing feels wrong yet, and you would like something firmer than a feeling.
In the video: Does one late payment predict the next? (0:31), is a pile of overdue invoices a bigger risk? (1:30), what does a bounced reminder mean? (2:25), what to do (3:29).
Here is what the invoice data says about 6 early signs, in the order they show up in a customer’s history, with what followed each one. Here, customers are the businesses and people who owe the invoices. Paidnice customers are the businesses that use Paidnice.
Does one late payment predict the next?
After a payment 1 to 7 days late, a customer’s next invoice is paid on time 28 in 100 times, against 82 in 100 after an on-time payment, in our analysis of invoice data from over 1,000 Paidnice customers.
One late payment cuts the chance the next invoice is on time from 82 in 100 to 28 in 100
Share of a customer's next invoice paid on time, by how the previous invoice was paid.
- Previous paid on time82 in 100
- Previous 1 to 7 days late28 in 100
Source: our analysis of invoice data from over 1,000 Paidnice customers.
The next-invoice figure shows how customers behave in the data. It does not prove that one late payment causes the next, and a customer who slipped once can recover. A week late is worth a note on the account before the next invoice goes out.
Free: Payment reminder email templatesCopy the reminder emails for before, on and after the due date.Can the first invoice show who will pay late?
Customers who pay their first invoice on time go on to pay 73 in 100 of their later invoices on time, in Paidnice data. If the first invoice is 1 to 14 days late, they pay 39 in 100 of their later invoices on time.
The first invoice is the earliest test you get on a new customer. A late first payment is the point to shorten terms, ask for a deposit on the next job, or move the customer to a firmer reminder policy. The wider picture across every stage of collection is in our credit control statistics.
Is a customer with an overdue invoice a bigger risk?
A customer with 1 overdue invoice is about 3 times as likely to leave the next invoice unpaid 75 days after its due date (14 in 100 against 5 in 100), in Paidnice data. With 4 or more overdue invoices, it is about 5 times as likely (26 in 100).
Customers with more overdue invoices leave the next one unpaid more often
Share of a customer's next invoice still unpaid 75 days after the due date, by overdue invoices already open.
- No overdue invoice5 in 100
- 1 overdue invoice14 in 100
- 4 or more overdue26 in 100
Source: our analysis of invoice data from over 1,000 Paidnice customers.
Customers with several overdue invoices differ in other ways too, so the pile marks trouble. It does not show that the pile causes it. A customer with 4 or more overdue invoices is worth a call before another invoice goes out on the same terms. Another automatic email adds little at that point, as we found in how many payment reminders it takes to get paid.
What does ignoring the first reminder tell you?
Customers who do not pay within 3 days of their first overdue reminder leave 9 in 100 later invoices unpaid at 75 days, against 2 in 100 for customers who do, in Paidnice data.
A quick response to the first reminder goes with fewer unpaid invoices later. Silence after it is a sign to try a call instead of a second copy of the same email. Steps for a customer who stays silent are in when a customer ignores invoice reminders.
What does a bounced reminder mean?
Invoices with a bounced reminder (an email that comes back undelivered) are still unpaid at 75 days about twice as often (13 in 100 against 6 in 100), in Paidnice data.
A bounce can mean the invoice is going to a mailbox nobody reads: a contact who left, a changed domain, or an accounts address that was never right. A bounced reminder is the one sign on this list you can fix the same day. Check the contact in Xero or QuickBooks Online, find a second address, and resend.
What happens to the last invoice before a customer leaves?
When you stop invoicing a customer, the final invoice is twice as likely to be unpaid at 75 days (29 in 100 against 13 in 100), in Paidnice data. In Australia it is 3 times as likely.
Part of the final-invoice pattern works the other way round: some customers stop being invoiced because they did not pay. Still, a customer who is winding down work with you has open invoices that need chasing now.
What followed each of the 6 late payment warning signs?
The table below sets out the 6 signs in the order of the sections above, with what followed each in Paidnice data. After 4 or more overdue invoices, for example, the next invoice is unpaid 26 in 100 times, against 5 in 100.
The 6 warning signs and what followed each
What each sign was followed by, in every 100 invoices, against customers without the sign.
| Warning sign | With the sign | Without it | What is measured |
|---|---|---|---|
| Previous invoice paid 1 to 7 days late | 28 in 100 on time | 82 in 100 on time | Next invoice paid on time |
| First invoice paid 1 to 14 days late | 39 in 100 on time | 73 in 100 on time | Later invoices paid on time |
| 4 or more overdue invoices open (1 open: 14 in 100) | 26 in 100 unpaid | 5 in 100 | Next invoice unpaid at 75 days |
| No payment within 3 days of the first overdue reminder | 9 in 100 unpaid | 2 in 100 | Later invoices unpaid at 75 days |
| Reminder bounced | 13 in 100 unpaid | 6 in 100 | Invoice unpaid at 75 days |
| Last invoice before the relationship ends | 29 in 100 unpaid | 13 in 100 | Unpaid at 75 days, against earlier invoices |
The last column says what each sign measures. Invoices left unpaid and invoices paid on time are different outcomes, so the rows are not compared with each other.
Source: our analysis of invoice data from over 1,000 Paidnice customers.
Every sign on this list is a pattern in how customers behave. None is proof that the sign caused the unpaid invoice. The practical response is to change terms and follow-up for that customer.
Invoice size is missing from the list on purpose. Inside the same business, about 2 fewer invoices in every 100 are paid on time when the invoice is more than twice a customer’s usual amount, in Paidnice data. For the biggest fifth of a business’s invoices it is about 3 fewer in every 100, with no rise in unpaid invoices.
A large invoice is paid on time slightly less often, with no rise in unpaid invoices. The signs above are about the customer’s payment habit.
Who are the serial late payers?
Among customers with 5 or more invoices, 3 in 10 are late on 8 invoices in 10 or more, in Paidnice data. Those serial late payers account for 55 in 100 late invoices and 71 in 100 of the invoices still unpaid at 75 days.
3 in 10 customers account for 7 in 10 of the invoices that stay unpaid
Serial late payers, late on 8 invoices in 10 or more, among customers with 5 or more invoices.
- Share of customers3 in 10
- Share of late invoices55 in 100
- Share of invoices unpaid at 75 days71 in 100
Source: our analysis of invoice data from over 1,000 Paidnice customers.
In this data, most unpaid invoices come from a group that can be named. A separate reminder policy for that group, with earlier escalation, is where to start.
In a typical business, 2 customers in 3 never go seriously overdue. The worst 1 in 20 customers bill 24% of revenue and cause 70% of the seriously overdue money. Seriously overdue means still unpaid 75 days after the due date, or paid 30 or more days late.
Will a late payer turn around?
Among customers with 10 or more invoices, only 1 in 7 who pay their first 3 invoices late go on to pay most of their invoices on time, in Paidnice data. This figure was not re-run on the credit-invoice base used for the other signs.
Among customers with 10 or more invoices, a late start is rarely followed by a turnaround, so the realistic aim is to manage it: shorter terms, a deposit, a firmer reminder policy, and a late fee as leverage. Waiting for the customer to change on their own is a poor bet in this data.
How do you act on these warning signs in Paidnice?
Paidnice gives every customer a credit score from 0 to 100 built from their payment history with you. Every customer starts at 100, and the score falls for paying late and for the current overdue position, so the signs above pull it down as they appear.
- Watch the score. It sits next to each customer’s name, and you can tune the penalties for late payment and overdue debt. See credit scoring.
- Move late payers to a firmer policy. Paidnice can move a customer from the good payers group to the late payers group as their score falls, with groups and policies.
- Escalate the stack. Raise an escalation when a customer’s total balance passes a line you set, or an invoice reaches a set number of days overdue, so a person calls: escalations.
- Catch bounces. Every reminder shows its delivery status, so a bounce is visible the day it happens.
Late fees are optional. You can run reminders and statements without them, and a fee gives a serial late payer a reason to pay your invoice first. Book a demo and we will set the groups up with you.
How we measured late payment warning signs
We measured each sign on credit invoices, with payment checked 75 days after the due date, across invoice data from over 1,000 Paidnice customers.
- Base: credit invoices: payment terms of 1 day or more, not paid on or before the issue date.
- Outcome: paid or unpaid 75 days after the due date. "On time" means paid on or before the due date.
- Habit, not cause: the next-invoice and first-invoice figures show how customers behave. They do not prove that one late payment causes the next, or that the first invoice sets the rest.
- Worst 1 in 20 customers: measured inside each business, then the typical business reported. Seriously overdue means unpaid 75 days after the due date, or paid 30 or more days late. The 70% share runs from 65% to 80% depending on business size.
- Stacked invoices: customers with several overdue invoices differ in other ways, so the stack marks risk rather than creating all of it.
- First reminder: the 2 in 100 and 9 in 100 figures describe customers who did or did not pay within 3 days of their first overdue reminder, not the effect of the reminder itself.
- Final invoice: a relationship counts as ended when no later invoice exists in the data, and some customers stop being invoiced because they did not pay, so part of this runs in reverse.
- Serial late payers: covers customers with 5 or more invoices. The turnaround figure covers customers with 10 or more invoices and was not re-run on the credit-invoice base.
- Invoice size: same-business comparisons on credit invoices; the first gap holds in 2 in 3 businesses.
- Table order: the table follows the order of the sections above. The signs measure different outcomes, so the table does not rank them.
FAQ
How do you deal with a customer who does not want to pay?
Find out which it is first: a dispute, a delay or a cash problem, each needs a different reply. Our guide to a customer not paying an invoice covers all three. In our data, a customer who pays within 3 days of the first reminder leaves 2 in 100 later invoices unpaid, so a quick first response goes with fewer unpaid invoices.
What can you do when a customer does not pay?
Switch channel after the first ignored reminder, then set a date for escalation: a call, a hold on new work, a late fee, then a letter before action and collections. The steps are in when a customer ignores invoice reminders and when to send an invoice to a debt collection agency.
Is there a way to get rid of late payments?
Not fully, but most of the damage is concentrated: 3 in 10 customers with 5 or more invoices cause 71 in 100 of the invoices still unpaid at 75 days. Shorter terms, a deposit and a firmer reminder policy for that group are the levers you control.
Can I charge interest on an overdue invoice?
In the UK, yes, on business invoices by statute: statutory interest at 8% plus the Bank of England base rate, plus a fixed sum of £40, £70 or £100 per invoice. Limits for other markets are in how much you can charge for late fees.
Will a 2 day late payment affect a customer’s credit score?
Credit bureaus set their own rules. In Paidnice, the credit score every customer carries falls for late payment, with recent payments counting most. On a supplier’s own records, a short delay is a sign worth noting: after a payment 1 to 7 days late, the next invoice is on time 28 in 100 times against 82 in 100.
About the editorial team
Denym started Paidnice in 2022 after customers paying late left his own business short on payroll. He has led it to $1 billion collected on time across more than 1 million invoices, and writes about credit control, late fees and getting paid on Xero and QuickBooks.
App of the Year