Days-sales-outstanding is a lagging indicator. The number that matters is committed collection cost per invoice — and most firms and finance teams under-count it.
What an aged receivable actually costs
- Staff time chasing it (usually the founder or partner)
- Working capital tied up
- Emotional cost of the relationship going bad slowly
- Opportunity cost of not using that cash
Call it your break-even point on collection effort. Below that, you're paying to collect.
The four-way decision
Every invoice past 60 days gets one of four calls:
- Reissue with a firm date. Client is fine, invoice got lost in email. Send a friendly-but-firm reminder with a specific due date.
- Renegotiate. Genuine cash-flow issue on the client side. Payment plan in writing beats silence.
- Escalate. Ignored twice. Move to the partner or a formal demand letter.
- Write off and end the relationship. Below a break-even where chasing is more expensive than the invoice — write it off, keep the tax deduction, don't take the client back.
The trap
Waiting for "next month for sure" past the point where writing off and moving on is cheaper than the emotional overhead of chasing.
Draft your reminder with the Invoice & Payment Terms Kit, which includes a dunning email sequence.