Accounts receivable

Every unpaid invoice is part of accounts receivable, often shortened to AR. On your balance sheet it counts as an asset, but you can’t make payroll with it. A contractor can be profitable on paper and still run out of cash when too much money sits in AR.

Track receivables by client and by age. An aging report sorts open invoices by how long they’ve been unpaid, so you can see which ones need a call. Retainage is a receivable too, and it’s easy to lose track of because it comes due months after the work.

To keep AR low: invoice the day the work is done, put the due date and payment options on every invoice, take deposits and bill in stages, and follow up on a set schedule. The older an invoice gets, the harder it is to collect.

If a client stops paying, check your lien deadlines right away. Mechanic’s lien rights depend on notices and filings with strict, state-specific dates, and they don’t wait for collection calls.