Outstanding invoice: What they are and how to collect them

Managing outstanding invoices is crucial for preventing payment delays. You’ve delivered the product or service, sent the invoice, and now you’re waiting on payment. While some invoices are simply in progress, others risk slipping past their due dates—causing cash flow issues and operational disruptions.

The key is understanding the difference between outstanding invoices and overdue invoices—and knowing how to track and manage them effectively.

What is an outstanding invoice?

An outstanding invoice is a bill that has been sent to a customer but remains unpaid within the agreed payment period. It represents revenue that a business expects to collect, but hasn’t yet received.

Here’s how it works:

1. A customer purchases goods or services
2. The business sends an invoice detailing the amount due and payment terms
3. The invoice is recorded in accounts receivable, reflecting the pending payment
4. As long as the customer is still within the payment window, the invoice is considered outstanding
5. If the customer misses the deadline, the invoice becomes overdue

Tracking outstanding invoices is essential, especially for businesses that rely on invoice financing (borrowing against unpaid invoices) or invoice factoring (selling invoices to third parties for immediate cash flow).

Even for businesses that don’t use these financial strategies, staying on top of outstanding invoices helps ensure timely payments and financial stability.

Why handling outstanding invoices the right way matters

Invoices are the foundation of your business’s cash flow. Without a system in place, late payments can quickly snowball into serious cash flow problems.

While most customers will pay on time, delays happen. Some are due to oversight, while others stem from customers intentionally delaying payments.

Either way, failing to track outstanding invoices can have significant consequences:

• Operational instability: Businesses need consistent cash flow to cover payroll, reinvest in growth, and maintain daily operations. Open invoices create uncertainty and financial strain.
• Unreliable cash flow: If payments arrive unpredictably, it’s harder to make informed financial decisions and plan for the future.
• Increased credit reliance: Businesses without steady incoming payments may be forced to rely on short-term loans or credit lines to cover expenses—driving up costs and interest payments.
• Duplicate invoicing risks: Without a tracking system, businesses may mistakenly send duplicate invoices. This inflates accounts receivable, creates confusion, and can frustrate customers.
• Damaged client relationships: Poor invoice management—whether failing to remind customers of upcoming due dates or not following up on late payments—can strain client relationships and erode trust.

A well-organized invoice management system prevents these issues, keeping payments predictable and business operations stable.

Overdue vs. outstanding invoices: What’s the difference?

Every invoice falls into one of two categories: outstanding or overdue.

• Outstanding invoice: The customer hasn’t paid yet, but the payment deadline hasn’t passed.
• Overdue invoice: The invoice is past its due date, and the customer still hasn’t paid.

For example, if you send an invoice on March 1st with a due date of April 1st, it remains outstanding throughout March. If the customer doesn’t pay by April 1st, the invoice becomes overdue and requires follow-up.

3 strategies to manage and collect outstanding invoices effectively

Outstanding invoices are a normal part of business, but untracked invoices can quickly turn into overdue invoices. A proactive approach ensures timely payments and keeps cash flow stable.

Here are three key strategies:

1. Build a personalized collection strategy

Every business should have a collection strategy tailored to its customers and industry. Factors like payment terms, invoice amounts, and customer cash cycles all influence how you approach collections.

For example, restaurants place frequent supply orders. To prevent unpaid balances from piling up, a supplier may require customers to pay off previous invoices before placing new orders. However, this policy might not be necessary for businesses with different cash flow structures.

Here are some ways to customize your collection approach:

• Reminder frequency: How often should payment reminders be sent?
• Communication method: Do customers prefer email, phone calls, or automated messages?
• Late fees: Would adding penalties motivate customers to pay on time?
• Payment plans: Should payment plans be available to all customers or only select accounts?
• Invoice frequency: Would customers benefit from more frequent invoicing to align with their cash flow?

2. Establish incentives and penalties for payment

Customers are more likely to pay on time if there’s a financial incentive or penalty attached. Clearly stating these terms upfront helps avoid disputes and encourages compliance. A few examples of incentives for early payments include:

• Discounts for paying before the due date
• Coupons for future purchases
• Extended warranties on products/services
• Bonus products or discounted services

And instances of penalties for late payments involve:

• Flat late fees
• Tiered penalties that increase the longer the invoice is overdue
• Interest charges on outstanding balances
• Suspension of future orders until overdue invoices are cleared

These policies should be clearly stated on invoices, sales agreements, or customer contracts. Regularly reminding customers about these terms can encourage them to take advantage of discounts—or avoid penalties altogether.

3. Offer flexible payment options

Customers are more likely to pay on time when the process is simple and convenient. Offering multiple payment methods ensures they can choose the option that works best for them.

Common payment methods include:

• Check
• Bank transfer
• Online payments
• App-based payments (PayPal, Venmo, Zelle, etc.)
• ACH transfers
• Payment cards (credit, debit, charge cards)

For added convenience, consider offering auto-pay enrollment for recurring invoices. This reduces the risk of late payments and simplifies the process for customers.

When to involve debt collectors

Although it’s best to resolve payment issues directly with customers, severely overdue invoices may require debt collection. If your business uses collection agencies, customers should be informed of this policy in advance.

Having a clear escalation process ensures you handle overdue payments professionally while maintaining customer relationships.

3 communication techniques to remind clients about outstanding invoices

Consistent and professional communication improves collection rates and strengthens customer relationships. Here are three techniques to ensure clients stay informed about their outstanding invoices.

1. Create effective reminder emails

A well-crafted reminder email brings an outstanding invoice back to the client’s attention without being pushy. Here’s an example:

Subject: Reminder that Jones & Co. Invoice #44276 Due April 8, 2025

Body: ‍Molly,

This is a reminder that your invoice with Jones & Co. is due soon.

• Invoice #44276
• Dated: March 18, 2025
• Amount Due: $1,520.80
• Due Date: April 8, 2025

A copy of the invoice is attached for your reference.

We offer multiple payment options. To make or schedule a payment, click here: [link to payment site]. Thank you for choosing Jones & Co. for your supply needs. Let us know if you have any questions!

Here’s why this email reminder works:

• The subject line is clear and informative—clients immediately know the purpose of the email.
• The message is concise—it provides the necessary details without overwhelming the reader.
• The tone is professional and neutral—no accusatory language, just a simple reminder.

And here’s what to avoid:

• Phrases like “You still haven’t paid” can come across as confrontational.
• Stating that a payment is "urgent" too early may cause unnecessary stress.
• Emails should include invoice details, payment options, and a direct way to ask questions.

2. Timing and content of reminders

Sending reminders is important, but the timing and method of communication impact their effectiveness. Some best practices for timing your reminders correctly are:

• Before the due date: Send a friendly reminder a few days before the invoice is due to give customers enough time to make a payment.
• On the due date: A same-day reminder reinforces the payment deadline.
• After the due date: If payment hasn’t been received, follow up promptly with a polite past-due notice.

And determining the best communication method to choose can differ by business need:

• Email reminders: Ideal for formal documentation and ease of reference.
• Text message reminders: Useful for quick follow-ups, especially for businesses with high transaction volumes.
• Phone calls: Effective for overdue invoices when a personal touch is needed.

Tracking customer responses can help refine your approach. Some clients may prefer email over phone calls, or vice versa—adjust your strategy based on what works best.

3. Automation invoice reminders with the right tools

Manually tracking outstanding invoices is time-consuming, but automation can streamline the process. Invoice management software helps businesses:

• Send automatic reminders at key intervals before and after an invoice is due
• Record payments in real-time within accounting systems for easy tracking
• Generate order summaries so customers have a clear record of their transactions
• Analyze payment trends to improve invoicing strategies

Automation reduces human error, keeps reminders consistent, and ensures no invoice slips through the cracks. By using invoice management software, businesses can improve cash flow while reducing the administrative burden.

How Ramp Bill Pay is the best way to simplify invoice management from end to end

Ramp Bill Pay is an advanced, AI-driven invoice management platform designed to tackle the core obstacles faced in accounts payable. From the moment an invoice is received to the final payment and reconciliation, Ramp automatically extracts invoice data, streamlines approval routing, and integrates seamlessly with your ERP—enabling faster month-end closes with fewer manual steps.

While traditional AP software struggles with limited integrations, inconsistent purchase order matching, and fragmented workflows, Ramp Bill Pay delivers automation that is agile, precise, and comprehensive. It’s engineered for transparency and efficient oversight, supporting your AP process from start to finish.

Ramp is recognized as one of the easiest AP softwares to use based on G2 reviews (as of June 5, 2025). Supported by 2,000+ reviews and a 4.8/5 average star rating, Ramp is trusted by teams of all sizes to eliminate repetitive tasks, prevent costly mistakes, and maintain clean, accurate financials. One user describes Ramp as the best way to manage business finances, highlighting its robust AP and expense management capabilities.

Common pain points in accounts payable workflows

AP teams typically encounter three major bottlenecks:

• Reconciling invoices that don’t match purchase orders
• Approvals delayed by slow, manual handoffs
• Entering and syncing payment data across disparate systems

Ramp Bill Pay addresses each challenge with a robust set of AP tools:

• Customizable approval flows with smart user permissions and routing
• Automatic invoice scanning and general ledger coding powered by AI
• End-to-end controls across procurement, accounting, AP, and expenses
• Two-way invoice and PO matching for streamlined reconciliation
• Vendor tracking, batch payment capabilities, and scheduled recurring bills
• Real-time ERP integration, syncing bidirectionally with NetSuite, QuickBooks, Xero, and others
• Multiple payment options including ACH, checks, cards, and both domestic and international wires

Organizations from every sector have adopted Ramp to bring clarity and efficiency to their AP operations. Customers have achieved results such as:

• Snapdocs switch off of BILL for Ramp and accelerated bill pay processes with accurate OCR
• KIPP Nashville Public Schools shortened approval cycles from a month to under a week
• Skin Pharm reduced their bill approval timeline from weeks to just 48 hours

Why select Ramp Bill Pay for AP and invoice management?

Ramp Bill Pay is more than just another accounts payable solution—it sets the bar for what top-rated invoice management software should deliver. With advanced automation, seamless ERP connections, and intuitive workflows, Ramp empowers your finance team to work faster and with greater assurance on every transaction. Start with Ramp’s free plan, move to $15 per user per month, or choose a custom enterprise package.

Let’s cut down your bill processing time. Get started with Ramp Bill Pay.