What can I do when a client won't pay an invoice?

Before you chase, check your contract, quote or terms of trade, and the invoice itself. Look for:

• the payment due date and any agreed late payment interest (you can only charge interest if the contract allows it)
• the exact legal entity you contracted with, which you can check on ABN Lookup or the ASIC register
• any dispute clause that requires negotiation or mediation before court

Gather your evidence while it's fresh: the signed contract or accepted quote, emails, proof the work was delivered, and the invoice.

Most unpaid invoices are resolved before anything formal happens.

1. Send a reminder on or just after the due date, with the invoice attached and your bank details.
2. Call. Find out whether it's a cash flow problem, an admin slip or a complaint about the work. Each needs a different response.
3. Offer a payment plan if the client can't pay in one go. Put the instalments and dates in writing.
4. Send a letter of demand. State the amount, what it's for, a firm deadline and what you'll do next. Send it in a way you can prove it arrived.

If the client says the work was defective, treat it as a dispute rather than simple non-payment. Some state small business commissioners offer free or low-cost mediation for business disputes.

Every state and territory has a cheaper, simpler process for smaller debts, run through the local or magistrates court or, in some states, a tribunal. Each sets its own limits, fees and forms, so check the website of the court or tribunal where the client is based. Larger debts go through the ordinary court process.

Winning a judgment doesn't put money in your account automatically. If the client still won't pay, you can ask the court to enforce it, for example through instalment orders, seizure and sale of property, or garnishee orders.

If the client is a company, you can serve a statutory demand under section 459E of the Corporations Act. The debt must be due and payable and at least the statutory minimum, which is currently $4,000. The company then has 21 days to pay or apply to court to have the demand set aside. If it does neither, it is presumed insolvent and you can apply to have it wound up.

This is a powerful tool, but only for debts that aren't genuinely disputed. If there's a real dispute or an offsetting claim, the court can set the demand aside and you may have to pay costs. The demand must follow the prescribed form, and unless the debt is a court judgment it needs a supporting affidavit. A Sprintlaw lawyer can prepare a letter of demand or statutory demand for a fixed fee.

A debt collection agency will chase the debt for a commission, or buy it from you for a fraction of its value. Either way, it signals the relationship is over.

Time limits apply. In most states and territories you generally have six years from when the debt fell due to start court action. The Northern Territory is shorter, at three years. Part payments and written acknowledgments of the debt can affect the timing, so get advice if a debt is getting old.

Keep a record of every reminder, call and promise to pay. If you end up in court, that paper trail is your case.