Guide · Collections
When a client won't pay: options before collections
An unpaid invoice is a business problem before it is a legal one. Work through the cheaper options first, keep a written record, and decide early how much the money is worth chasing.
First, check the invoice
Confirm the invoice was sent to the right person, the amount is correct and the work was delivered as agreed. A surprising number of “unpaid” invoices are stuck in an AP queue, missing a PO number or sent to a contact who left. Fix the admin before you escalate.
Put the demand in writing
A short, factual demand letter or email is the next step. Include the invoice number, the amount, the original due date, a new deadline (usually 7–14 days), how to pay, and what happens if payment does not arrive. Attach the invoice, the signed quote or contract, and the delivery or approval evidence.
Offer a payment plan
If the client says they cannot pay in full, a written plan with dates is better than a promise. Put the schedule in an email, ask them to confirm, and stop work if the plan is not met. A plan does not erase the debt; it restructures it.
Stop work and hold deliverables
If the contract allows it, suspend work and withhold deliverables until payment. Check the contract and your state’s rules first — and be careful with work you have already delivered, because withholding it may not be lawful. Tell the client in writing what you are doing and why.
Mediation
For a dispute about the work rather than the ability to pay, mediation can be faster and cheaper than court. A neutral mediator helps both sides agree on a number. It is voluntary, but a signed settlement can be enforceable.
Small claims court
Small claims is designed for straightforward money disputes without a lawyer. The limit varies by state — often a few thousand dollars to $25,000 — and so do the filing fees and procedure. Bring the contract, invoices, delivery proof, emails and a short timeline. Even a judgment does not guarantee payment; collecting is a separate step.
Collections
A collections agency takes a percentage of what it recovers, often 25–50%. It can be effective for a clear, undisputed debt, but it can also damage the relationship and your reputation. Check the agency’s licence and contract terms before assigning the debt.
Attorney and liens
For a large debt, a letter from a lawyer often moves things. Contractors and suppliers may have mechanics lien rights on the property; the rules and deadlines are state-specific and strict. Talk to a construction lawyer before relying on a lien.
What to prepare
- The signed contract, quote or statement of work.
- The invoice, proof it was sent and any reminders.
- Delivery or acceptance evidence: signed note, approval email, timesheet.
- The payment history and any partial payments.
- A short timeline of what was agreed and what happened.
A note on time limits
Every state has a statute of limitations for contract claims, and the clock can start at different points. Waiting too long can end your ability to sue. Check the limit for your state and the type of contract before you decide to wait it out.
This is general information, not legal advice. For a significant amount, talk to a lawyer in your state. For the reminder sequence before this stage, see late payment reminder emails.
Related
Late payment reminder emails
Three emails, a phone call and when to escalate.
Payment terms and late payment
Net 30, due dates and a reminder sequence that works.
Statement of account guide
List every open invoice and ask for the balance in one page.