Late Invoice Statistics You Should Know in 2024

Did you know that small businesses in the US typically receive payment 8 days after the deadline?

Late Invoice Statistics

Since the outstanding payment practice does not affect only small businesses, we have decided to dissect this topic and single out the most recent data regarding late invoice statistics. 

We will also give you some actionable tips on how to get paid faster, as well as answer some of the most frequently asked questions regarding late invoices, so make sure to keep on reading. 

Key takeaways:

What is a late invoice?

A late invoice is a payment request document with an outstanding amount past its due date. In other words, every invoice issued to a customer that remains unpaid after the payment deadline is considered late. 

What percentage of invoices are paid late?

Of all the invoices issued in the US,55% are paid late

As the research conducted by Atradius shows, less than half of all US invoices are paid on time (36%), while 9% of invoices end up written off. 

Although the late payment practice is not a recent phenomenon, 57% of surveyed US businesses report a noticeable increase in payment duration over the last 12 months, whereas 22% do not expect to see any positive changes in the late payment trends in the future

Late invoice payments and small businesses

Unsurprisingly, small and medium-sized businesses are usually the most affected by late invoice payments. Their day-to-day operations are not exactly smooth sailing, and their capital is quite limited — especially when they’re just starting out. 

Yet, how frequently do small businesses need to handle late invoices? Let’s look at the numbers. 

Small businesses are usually paid 8 days late

According to Small Business Insight research, US small businesses, on average, receive payment 8 days later than the agreed deadline

Considering that 99% of all companies in the US are qualified as a small business, the late invoice payments impact more than 45% of the US workforce.

Naturally, with their money captured in unpaid invoices, small businesses temporarily decrease their chances for growth and risk increased employee turnover. This is especially the case if the lack of cash flow impacts the compensation or career growth opportunities. 

Small to medium-sized businesses spend 14 hours per week chasing late payments

As expected, the majority of small businesses do not waste time twiddling their thumbs when faced with late payments. 

In fact, Quickbooks research on the impact of late payments shows that 65% of small to medium-sized US businesses (25-200 employees) spend 14 hours per week dealing with late invoices. 

When broken down to a more granular level, this number would amount to a staggering 2 hours and 48 minutes per day businesses waste completing tasks related to payments that fall behind

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38% of small businesses fail because of financial challenges

Running out of capital is among the top reasons small businesses fail within their first year. In fact, as the Forbes small business statistics show, 38% of US small businesses fail exactly due to financial challenges

Considering that US small businesses with unpaid invoices report being owed up to $30,000 on average, it is difficult not to spot a link between poor payment practices and business failures.

Late invoice practices: Global statistics

Late payment practice is not confined to a geographical location. Let’s see where different countries and regions stand on overdue invoices.

80% of Australian businesses struggle with late payments

A survey by Creditor Watch found that more than 80% of surveyed Australian businesses grappled with late invoices in the last six months of 2023. Moreover, 37% of Australian companies regularly deal with payments issued more than 30 days late. 

Small business owners in Australia are particularly affected by the late payment practices, reporting a loss varying from $6,000 to $30,000 per year just from outstanding payments

25.2% of invoices issued in the UK are not being paid on time

As the latest Payment and cash flow review report by the UK Department for Business and Trade highlights, UK businesses report that 25.2% of their overall invoices are not being paid on time

Small businesses operating in the UK do not have it any easier either. In fact, more than 50% of UK small businesses regularly wait for late payments to be cleared. 

Since there are more than 5 million small businesses in the UK, this amounts to 3 million companies that regularly struggle to receive payment for their services on time

With such a poor payment culture, it is not surprising that as many as 50,000 small businesses in the UK close every year

50% of all the invoices issued in the EU are paid late

One out of two invoices issued in Europe is either paid late or not paid at all, according to the European Commission report.

This practice impacts European businesses to the extent that 25% of all bankruptcies are caused by late invoices

To reduce such occurrences to a minimum, in 2023, the European Commission proposed a regulation that would limit the maximum payment term to 30 days. Previously, this period could have been extended to 60 days or more — which usually led to damaging operating consequences, especially for small businesses. 

The consequences of late invoice payments

Late-paying customers not only negatively impact their clients’ financial performance but can also leave their footprint on a business’ resignation rate. 

Let’s take a look at all the potential consequences of late invoice payments up close. 

Financial hardships and increased number of loans

One of the greatest constraints to small and medium-sized businesses’ growth are insufficient financial resources, according to the World Bank report

Yet, larger businesses are not spared the financial hardships, either. In fact, as the most recent PwC’s Global CEO Survey shows, 24% of CEOs believe their company might be highly exposed to significant financial loss due to inflation in the next 12 months

Late or unpaid invoices only add fuel to the fire in such uncertain times. 

To keep their head above water and ensure enough working capital, companies usually either need to change their entire business strategy or lay hold of business loans. 

As the latest Xero Research Note shows, the majority of businesses opt for a loan. By analyzing the connection between late payments and an increased number of business loans, the researchers discovered that small businesses borrowed more funds whenever invoices were paid late

Analyzing data from the US, Australia, New Zealand, the UK, and Canada over 5 consecutive years, researchers found that small businesses affected by late invoice payments collectively borrowed $4418.2 billion.

Operational issues

Usually, it is only a matter of time before the lack of funds triggered by late payments begins to threaten day-to-day operations. 

In case a business relies solely on external payments, invoices not getting cleared in time may even result in insufficient working capital. This, in turn, impacts everything — from standard procedures, such as running payroll and meeting supply demands, to unexpected matters, such as emergency repairs or equipment failures. 

Hiring freeze 

28% of surveyed business owners who participated in a research by Nerdwallet claim late invoices impact their business to the point where they have to put recruitment on hold.

It’s only logical — waiting for outstanding invoices to be paid takes its toll on a business's cash flow. The financial shortfall naturally prevents companies from hiring new employees and adds up to the existing workload — leading to overworked employees and potentially even an increased resignation rate. 

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Tips on how to get paid faster

Even though the late invoice statistics may not exactly inspire hope, you can take measures to speed up the process of getting paid and, hopefully, avoid ever having to chase after outstanding payments.

Use discounts and incentives

It’s not surprising that discounts increase our feelings of excitement, happiness, and pleasure. After all, consumer psychology research has proven this point time and time again. 

Yet, discounts and incentives may actually work even when we are long beyond the selling point and we are just looking to get paid on time.

Offering a discount for early payments motivates your clients to pay ahead of schedule and places you ahead of your competitors — especially if they don’t provide such a reward.

Think about what works for you, and go for a 5% discount for invoices paid within the first 7 days, or offer incentives such as additional support or services. 

Yet, keep in mind that incentivizing prompt payment can also impact your own finances. Some customers may even misuse this system, so it is best first to determine exactly how frequently you deal with late payments. 

If that is a common occurrence, receiving less money for your product may be better than not getting paid at all. 

Don’t forget to dispatch invoices

The thought of forgetting to send off an invoice for your own services may make you smirk, but nobody is immune to mistakes — especially during busy seasons. 

To avoid waiting for a payment months late simply because you have not issued an invoice, it is best to keep track of both the services you provided and all the invoices under one roof. 

The simplest way to do that is to track all your activities in a tool designed exclusively for that purpose, such as Clockify

In Clockify, you can dispatch an invoice immediately after you have finished tracking your tasks. 

Creating Invoice Clockify
Clockify lets you create and send off invoices quickly

Then, all you need to do is head off to the Detailed report section, and mark your tracked entry as invoiced as soon as you send off that invoice. 

Mark as invoiced Clockify
Clockify lets you mark all time entries as invoiced to keep track of your upcoming payments

Immediately after, you will see a green Invoiced tag appear next to your time entry. 

Mark as uninvoiced Clockify
Whenever you mark a time entry as invoiced in Clockify, you’ll see a visual cue appear

This way, you will always have a visual cue (or a lack of) that will tell you whether your customers are really late or you simply did not dispatch the invoice on time. 

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Send payment reminders

Sometimes, regardless of how promptly you dispatch an invoice, your clients may overlook your request for payment. Before you know it, weeks go by, and you are left with an outstanding invoice.

To reduce such occurrences to a minimum, try to be proactive, follow up, and remind your customers of the payments they need to settle. 

If you have been using Clockify to track your invoices, marking each invoice as paid as soon as the payment has been cleared helps you get a precise overview of all the late invoices, too. 

Invoice Status Clockify
Clockify gives you a quick overview of your invoice status

As soon as you notice an invoice with an Overdue status, you will know it is time to send your client a quick reminder that they have an outstanding payment to settle. 

This way, you will likely speed up the payment process and reduce the waiting time — especially if your customer has really let the payment due date slip from their mind. 

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Offer a variety of payment methods

If possible, give your clients several payment options they can choose from when paying for your services. 

Sometimes, something as simple as exceeding a transaction limit can slow down the money transfer process or entirely prevent your client from paying the invoice on time. 

So, think about providing your clients with greater flexibility. In addition to traditional payment options, such as credit and debit cards or bank transfers, consider introducing the option of paying via digital wallets and wire transfers.

This way, you will safeguard your business from outstanding payments due to money transfer troubles and stand out from the competition that may not provide such a smooth customer experience. 

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Include late payment fees

Rewards may serve as a motivational drive for the majority of people. However, in some cases, nothing else except charging extra will help you get paid on time. 

Yet, to be able to actually enforce late fees, you will need to be up-front and very specific about your late payment policies right from the start. 

Lay out the payment terms and conditions before you close the deal with the customer, and remember to include a section on your late fees policy in the invoice you dispatch.

However, keep in mind that certain US state laws limit the amount you can charge on unpaid balances, so make sure you are familiar with all the regulations valid in your state.

FAQs about late invoices

Outstanding invoices never stop to inspire confusion, so you may still have some questions about them. 

Take a look at some of the most frequently asked questions we have answered below.

What is the average late fee for invoices?

There isn’t one typical average late fee that works for all businesses. 

Companies usually charge either a flat rate fee (such as $10 or $100) or a certain percentage (1% or 5%) of the entire invoice amount. 

The amount, however, depends on a variety of factors — including different business policies, industry standards, and sometimes even laws and regulations valid in the state where a business operates. 

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What are the maximum invoice late fees by state?

As mentioned above, individual states may have different regulations regarding the maximum late fee for outstanding invoices. 

For example, in Florida, you can charge no more than 5% of the overdue amount. In Tennessee, on the other hand, you can charge 5% of the overdue sum for each month that passes, up to a maximum of 25%.

Yet, certain states, such as Illinois, Ohio, Michigan, and many others, do not have any regulations in place that cap the late fees amount. This is why it is always important to check your state regulations before you add a late payment penalty clause to your contracts.

How late is too late to invoice?

Typically, there is no such thing as an invoice sent too late, at least not in the US.

Namely, there is not a single US regulation that imposes a limit on how long companies can wait until they dispatch an invoice.

However, if you and your clients have agreed on a certain time limit for dispatching invoices — the question of what exactly would be considered too late depends on your agreement.

Also, different countries may have varying regulations regarding the time frames of dispatching invoices, so it is always best to consult with legal advisors on this question.

Why do people pay invoices late?

People pay invoices late for a variety of reasons, so there may not be one specific cause behind it. 

Still, research on organizational routines singled out 2 most common reasons behind this practice:

However, poor financial management practice is an umbrella term that covers a wide range of incidents — from forgetting about the outstanding invoice to experiencing cash flow troubles. 

Precisely because of that, if you are wondering what could be behind your client’s late invoice payment, it is always best to contact them directly. 

How does payment delay affect your business?

As we have already discussed above, payment delays can affect your business in more than one way — and none of them is positive.

From financial struggles to operational halts — chances are that whenever you’re in a situation where you have to chase after outstanding payments — your business would most likely have to invest a great deal of attention and energy into addressing the consequences of the lack of funds. 

Eliminate delayed payments with Clockify

Whenever you are faced with a payment for your services that didn’t come through, there is not much you can do but wait.

Yet, to eliminate (or at least reduce) such incidents to a minimum, you may want to consider automating your invoicing process with a time tracking and invoicing tool such as Clockify. 

If you use Clockify as your invoicing sidekick, you will get to store all the necessary details regarding your services in one place. Then, as the moment to collect payment arrives, all it takes is a couple of seconds to select all the details you want to include in your invoice and send it off.

All you need to do is: 

You can also decide whether you would like to add items to your invoice manually, or automatically import the time you tracked. 

Import In Invoices Clockify
Clockify lets you quickly select all the information you want to add to your invoice

Clockify’s invoicing feature also lets you add a discount to each invoice, which can serve as an extra motivational boost for your customers if you have decided to incentivize early payments.

This way, not only will you increase your chances of receiving payments on time, but you will also reduce the chances of omitting important information whenever you create an invoice. 

Sign up for Clockify for free today.