Back to the on-screen lesson ·
Unpaid invoices sorted into still within terms and overdue, and read for the cash they will and will not bring in before the date it is needed.
Paper packet. Every task here also exists on screen, where it is checked automatically; answers written on paper are not assessed by Nydus. When you are back at a device, enter your answers there.
You will sort a business's unpaid invoices into those still inside their terms and those overdue, find the invoice worth chasing first, and work out how much cash customers' invoices actually bring in during a month. You will also measure how long customers take to pay on average, and what part of what they owe is at risk.
Working capital counts invoices due this month as something that turns into cash. This lesson looks inside that line: which invoices, how old, and whether they will arrive before the date the money is needed. You already know that a sale on an invoice ends the cash cycle only when the customer pays; here you learn to see every unpaid invoice at once, and to read the list the way a careful owner does before a payment falls due.
| Term | What it means |
|---|---|
| Receivables | Money customers owe for sales already made. |
| Terms | The days a customer is allowed: thirty-day terms means due thirty days after issue. |
| Overdue | Past its due date and still unpaid. |
| Aging list | The unpaid invoices sorted by how old they are. |
| Average days to pay | What customers owe divided by one day's credit sales. |
| Bad debt | An invoice the business has given up expecting to be paid. |
| Credit control | The routine that turns invoices into cash on time. |
When Fixit Mobile repairs twenty phones for Delta Couriers and sends an invoice for 900 dollars, two things are true at once. The sale has happened: the work is done, the income statement counts 900 dollars of revenue, and Delta owes it. The cash has not moved: the account holds exactly what it held the day before, and Dan cannot pay his parts supplier with Delta's promise.
So every invoice is, for as long as it is unpaid, a small interest-free loan from the business to its customer. Most of those loans come back on time. Some come back late, and a few never come back at all — and the older an invoice gets, the more likely it is to be one of those.
That is why receivables are read in two columns rather than one total: the invoices still inside their terms, which the business has agreed to wait for, and the invoices overdue, which it has not. And it is why the whole list is also read as one number of days:
$$\text{average days to pay} = \frac{\text{owed by customers}}{\text{credit sales} \div \text{days in the period}}$$
which says how many days of sales are sitting in customers' accounts.
Another way: steps
Another way: table
Fixit Mobile's aging list on the 1st, all on thirty-day terms, in dollars.
| Customer | Invoice | Days old | Overdue | Inside terms |
|---|---|---|---|---|
| Harbor Dental | 600 | 44 | 600 | 0 |
| Northgate Library | 250 | 18 | 0 | 250 |
| City Taxis | 1100 | 35 | 1100 | 0 |
| Total | 1950 | 1700 | 250 |
1950 dollars of revenue is already counted. 1700 of it should already be in the account, and is not.
Age every invoice. Count the days from the date it was issued to today. On thirty-day terms, thirty-one days or more is overdue.
Sort, and total the columns. Each invoice goes wholly into one column. The two column totals must add to the total owed; if they do not, an invoice has been split or counted twice.
Read the list against a date. An aging list is not read for its total. It is read against the next payment the business has to make. If the parts supplier wants 700 dollars on Friday and the account holds 500, the question is whether 200 dollars of those invoices will arrive by Friday.
Choose the calls. The largest overdue invoice is usually the first call: it brings in the most if the call works. The oldest is the one most at risk of never being paid, and it deserves a firmer conversation. An invoice still inside its terms is not late; chasing it early spends goodwill and brings nothing forward.
Track the average. Each month, divide what is owed by one day's credit sales. Rising from 35 days to 50 over a quarter means customers are slowing down, often before any single invoice looks alarming.
Most late payment is not refusal; it is an invoice nobody at the customer has acted on. A routine prevents most of it, and each step comes earlier than the trouble it prevents.
Agree the terms before the work. A customer cannot be late against terms nobody stated. Put them in the quote.
Invoice the day the job is done, with the due date on the invoice, the customer's order reference if they use one, and how to pay. An invoice sent at the end of the month adds weeks to every job.
Remind a few days before the due date. A polite note catches the invoice that is sitting in the wrong inbox.
Call the day after it falls due. A conversation finds out whether the customer is disorganized, disputing something, or short of money — three different problems.
Pause further credit until an overdue invoice is paid. Continuing to work for a customer who is not paying makes the debt larger and the business the customer's lender.
Some invoices are never paid: the customer disputes the work, closes, or simply stops answering. The revenue was counted when the sale was made, so an invoice given up on becomes a bad debt, written off as a cost.
Waiting until an invoice is certainly lost overstates what the business will collect. A careful owner applies a collection rate to each age band from their own history — nearly all of the recent invoices, most of the older ones, perhaps half of the very old — and treats the difference as money at risk. A cash forecast built on the expected collections, not on the face value of the list, is the one that does not disappoint.
Chasing shortens the list after the fact. Several arrangements keep it short from the start, and each moves part of the cash cycle's end forward.
A deposit on ordering brings part of the price in before any work is done. A caterer who takes 30 percent when an event is booked has that share in the account weeks before the invoice would have been paid, and a customer who has paid a deposit rarely disappears.
Stage payments on a long job — a third at the start, a third halfway, a third at the end — keep the amount owed at any moment to one stage rather than the whole job. A builder on a three-month extension who invoices only at the end is lending the customer three months of materials and wages.
Payment on completion, by card or transfer before leaving, turns an invoice into a register sale. It suits jobs for households, who rarely expect credit, and it costs the card fee — usually far less than a month's wait.
Shorter terms for new customers, extended once they have paid reliably, limit how much any one unknown customer can owe.
A discount for paying early can work, but it is expensive: 2 percent off for paying twenty days sooner is a high price for twenty days of money, and it should be compared with what a line of credit for the same twenty days would cost.
None of these is right for every customer. Each is a way of deciding, before the work starts, how much of the business's money the customer will be holding and for how long.
A commercial cleaning company invoices about 36,000 dollars a quarter, all on thirty-day terms. Its owner works out the average days to pay each month: one day's credit sales are 36,000 ÷ 90 = 400. In January customers owed 14,000, which is 14,000 ÷ 400 = 35 days. By March they owe 20,000: 50 days.
Nothing on the aging list looked alarming on its own, so she sorts it. One client, a property manager with nine buildings, accounts for 11,000 of the 20,000, and its oldest invoice is 74 days old. Its accounts department has changed its system and now pays only against a purchase-order number, which her invoices do not carry.
She calls, gets the order numbers, reissues the invoices, and adds the order number to her invoice template. She also asks to be paid by bank transfer on the fifteenth of each month, which the client agrees to. Two months later the list is back to about 14,000.
The 6,000 dollars that came back is the difference between 50 days and 35 days of sales, 15 × 400. It is the same revenue she had earned all along; what changed is that it is now in her account rather than her client's, and she did not need the line of credit she had been about to arrange.
Several countries give businesses a legal right to charge interest or a fixed fee on invoices paid late by other businesses, and some require large companies to publish how quickly they pay small suppliers. The rules, rates and thresholds differ from place to place and change, so they are something to look up where the business trades. Knowing the right exists is often enough to make a polite reminder firmer.
Invoiced means paid. An invoice is a request. The money is the customer's until it arrives.
The total is what counts. A total mixes invoices nobody should chase with invoices that are weeks late. Split it.
An unpaid invoice is not revenue. It is revenue — the sale happened. It is not cash. Keeping those two apart is the whole lesson.
Cash comes in the month it is invoiced. It comes in the month it is paid, which on thirty-day terms is usually the month after, and for some customers later still.
Every invoice will be paid. The older the list, the less of it will. Plan on what is expected, not on what is owed.
A quiet customer is a paying customer. Silence about an overdue invoice is not agreement to pay it; it is the reason to call, and the sooner the better, while the work is still fresh in everyone's mind.
Start from the payment: the roaster wants 700 on Friday.
$700 - 250 = 450$
The account holds 250, so 450 must come in from customers.
Age the Harbor Office invoice: 420, fifteen days old.
$15 \leq 30 \Rightarrow \text{inside terms}$
Not late; the customer is within its rights.
Age the Town Hall canteen invoice: 610, fifty days old.
$50 > 30 \Rightarrow \text{overdue}$
Twenty days past its terms.
Compare the overdue amount with the gap.
$610 - 450 = 160$
Collecting it would cover Friday with 160 to spare.
Name the call to make.
$\text{the Town Hall canteen}$
Chase what is overdue before what is merely unpaid.
Note the quarter's credit sales: 27,000 over 90 days.
$27000$
Only sales made on invoice.
Find one day's credit sales.
$27000 \div 90 = 300$
The average invoiced each day.
Note what customers owe today: 13,500.
$13500$
The whole aging list's total.
Divide by one day's sales.
$13500 \div 300 = 45$
Forty-five days of sales are unpaid.
Compare with the terms of thirty days.
$45 - 30 = 15$
Customers take fifteen days longer than agreed, on average.
Find the cash that would be freed at thirty days.
$15 \times 300 = 4500$
Paid on time, the list would be 4,500 smaller.
Band the list: 2,000 up to 30 days, 800 at 31–60, 500 over 60.
$2000 + 800 + 500 = 3300$
The total owed.
Apply 98 percent to the first band.
$2000 \times 0.98 = 1960$
Tomasz's own history for recent invoices.
Apply 90 percent to the second.
$800 \times 0.90 = 720$
A little more is lost as invoices age.
Apply 60 percent to the third.
$500 \times 0.60 = 300$
Old invoices are often never paid.
Add the expected collections.
$1960 + 720 + 300 = 2980$
What the forecast should count on.
Find what is at risk.
$3300 - 2980 = 320$
Revenue counted that may never become cash.
Name where most of the risk sits.
$500 - 300 = 200$
Nearly two thirds of it is in the oldest band: those are the calls to make.
Decide which is overdue.
$50 > 30 \Rightarrow 400 \text{ overdue}$
More than thirty days old.
Find what is inside its terms.
$300$
Ten days old.
Total the list.
Fixit Mobile has three unpaid invoices, all on thirty-day terms. Sort each into the amount overdue and the amount still inside its terms, in dollars, and total the columns.
| Invoice, dollars | Overdue, dollars | Inside terms, dollars | |
|---|---|---|---|
| Delta Couriers, $40$ days old | 900 | ||
| Green Lane School, $5$ days old | 300 | ||
| Westgate Clinic, $33$ days old | 450 | ||
| Total |
Complete the worked solution: a business must pay a supplier $510$ dollars on Friday and has $290$ in the account. Customers owe $600$ on an invoice 45 days old, $300$ on one 12 days old and $280$ on one 38 days old, all on thirty-day terms. Can the overdue invoices close the gap?
Find the gap to Friday's bill.
$510 - 290 =$ g
What customers have to supply by Friday.
Add the two overdue invoices.
$600 + 280 =$ v
Only these are late; the customers have had their time.
Set aside the invoice inside its terms.
$300 \text{ is not yet due}$
Chasing it early costs goodwill and brings nothing forward.
Take the gap from the overdue total.
$(\text{overdue}) - (\text{gap}) =$ s
Above zero: collecting the overdue money would cover Friday with room to spare.
Name the first call to make.
$\text{the larger of the two overdue invoices}$
It brings in the most if the call works.
Long Row Gardens is owed $280$ dollars by The Orchard restaurant ($20$ days old), $640$ by Bramble Café ($52$ days old) and $410$ by Field Kitchen ($31$ days old), all on thirty-day terms. The owner has time for one phone call today. Which overdue invoice would bring in the most cash if the call works?
A design studio invoices every job on thirty-day terms. It invoiced $3600$ dollars in February, $4400$ in March and $2400$ in April. Its records show that three quarters of each month's invoices are paid the following month and the other quarter a month after that. How many dollars does it receive from customers in April?
Answer:
Tomasz wrote this note after invoicing the restaurants for June. Mark every sentence that treats money still owed as if it were cash.
This task has no paper form; do it on a device.
A wholesale bakery sells only on invoice. Over the last $90$ days its credit sales came to $3420$ dollars, and today its customers owe it $2432$ dollars. On average, how many days do its customers take to pay?
Answer:
An electrician's aging list, in dollars: $5700$ owed on invoices up to 30 days old, $2200$ on invoices 31 to 60 days old, and $600$ on invoices more than 60 days old. Her records show she eventually collects 98 percent of the first band, 90 percent of the second and 60 percent of the third. Fill in what she can expect to collect.
| Amount | |
|---|---|
| Expected from the first band | |
| Expected from the second band | |
| Expected from the third band | |
| Total expected to be collected | |
| Owed but at risk |
Lesson test: one question per skill, one attempt each, no hints. Your answers are checked when you submit.
Fixit Mobile is owed $250$ dollars by Delta Couriers on an invoice issued $27$ days ago, $800$ by Green Lane School issued $2$ days ago, and $350$ by Westgate Clinic issued $44$ days ago. All three are on thirty-day terms. How many dollars are overdue?
Answer:
You can age a list of invoices, total what is overdue, say which call to make first, and measure the average days customers take to pay. Tell someone why an invoice counts as revenue and still cannot pay a bill. Next: the other direction — the bills the business itself has not paid yet.
15. Your turn: invoices of 400 (50 days old) and 300 (10 days old), thirty-day terms, step 3
$400 + 300 = 700$
All revenue already counted, none of it in the account.