What to Do When a Client Doesn't Pay: A Step-by-Step Guide

Client not paying? I’ve been there. I remember opening my unpaid invoice and reloading my email for weeks, feeling the gut-wrenching frustration of being ignored. 

I kept hoping my polite reminders would do the trick—until they didn’t. The client ghosted me, and I had no idea what to do. I spent hours searching for advice and wished I found a guide to help me out of the dilemma. 

So, I decided to create this guide to save you time. 

Here’s a step-by-step guide on what to do when a client doesn’t pay—so you can get paid: 

What to Do When a Client Doesn't Pay 

1. Send a Reminder between 1-3 Days after the Due Date 

The first thing to do when a client doesn't pay on the due date is to send a polite reminder. Ideally, 1-3 days after the due date. They may forget to process the payment or miss your email with the invoice. 

When you send the reminder, attach your invoice again to eliminate the possibility of them claiming they can’t find it anymore. 

To simplify this process, use ManyRequests to automate invoice payment reminders. Once a recurring project/task is completed, your clients will receive an automated invoice of their bill. This helps you manage payments, charge for recurring projects, and monitor your cash flow without the administrative work. 

Template for the first follow-up with a non-paying client: 

Subject: Friendly Reminder: Invoice (#InvoiceNumber) Due

Hi (Client's Name),

I hope you're doing well! This is a friendly reminder that payment for invoice (#InvoiceNumber), totaling (amount), was due on (due date). I understand things can get busy, so I wanted to ensure this didn't slip through the cracks.

I've attached the invoice again for your convenience. Please let me know if you have any questions or if there's anything else you need from me.

I am looking forward to your prompt payment.

Best regards,

(Your Name)
(Your Agency Name) 

2. Send a Second Reminder between 7-10 Days After the Due Date

Send a second reminder seven days later if your initial reminder goes unanswered. The client may have overlooked your first email, especially if their inbox is crowded. 

They may also be delaying payment for other reasons. Send a slightly more assertive reminder to reinforce your seriousness about receiving payment. 

In this follow-up email, maintain your professional tone and reattach the invoice. 

3. Send a Debt Collection Letter After 20 Days of Unpaid Invoice

A debt collection letter is used when the client ignores initial reminders and continues to delay payment without a valid reason. It's a formal approach that signals you are serious about collecting your money and are prepared to escalate the situation if necessary. 

What a Debt Collection Letter Should Include: 

• Invoice details, including invoice number, the original amount due, and the payment date. 
• A new deadline for the client to pay the overdue amount. 7-10 days from the follow-up is ideal. 
• Attach your account details or payment links. 
• State the consequences or the actions you will take if you don’t receive the payment by the new deadline. This could be legal action, passing the debt to a collection agency, or escalating the issue to someone higher within the client's company. 

Template for a Debt Collection Letter: 

Subject: Final Notice: Overdue Payment for Invoice (#InvoiceNumber)

Dear (Client's Name),

I hope this message finds you well. This is a final notice regarding the overdue payment for invoice (#InvoiceNumber), due on (Original Due Date). As of today, the payment is (number of days) past due.

Please remit the (Total Amount Due) payment within the next (7-10) days. You can make the payment via (Payment Methods) using the following account details:

‍(Account Details/Payment Link).

If the payment is not received by (New Deadline Date), I will be forced to take further action, including escalating the issue to a higher authority within your company. I would not want to initiate legal proceedings or refer this matter to a debt collection agency, so please reach out.

Please consider this a final opportunity to resolve the outstanding balance amicably. I look forward to your prompt attention to this matter.

Best regards,

(Your Name)
(Your Agency/Business Name) 

4. Reach Out to Someone in the Company After 27 Days of Unpaid Invoice

When your emails and reminders go unanswered, contact the manager, director, or even a company executive with the authority to intervene and resolve the issue. 

The goal is to bring the payment problem to the attention of someone who may not be aware of the situation but can address it. This approach is efficient if the person you have been dealing with is unresponsive or unwilling to help. 

How to handle unpaid invoices by reaching out to someone in the company:

• Identify the right person who has the authority to resolve the payment issue. This could be a department head, a financial officer, or a senior manager. 
• Write a professional message and send it through email, LinkedIn, or another social media platform you find them on. Introduce yourself and explain the situation, then politely express your concern about the overdue payment. 
• Remind them of the payment terms that were agreed upon and reference any previous correspondence where the terms were discussed. 
• Ask direct questions to gain clarity on the situation. For example:some text
  • "Is there a specific reason why I haven’t received payment?"
  • "When will I be certainly paid?"

• End the email by asking for a concrete plan to handle the matter. 

Email template to use while reaching out to someone in the company. 

Subject: Urgent: Overdue Payment for Invoice (#InvoiceNumber)

Dear (Higher-up's Name),

I hope this message finds you well. My name is (Your Name), and I've been working with (Company Name) through (Primary Contact's Name) on (Project/Service Provided). Unfortunately, despite multiple reminders, the payment for invoice (#InvoiceNumber), due on (Due Date), remains outstanding.

I am bringing this matter to your attention as I have not received any response from (Primary Contact's Name). The agreed-upon payment terms have yet to be met, and this delay is impacting my business.

Could you please provide insight into why the payment hasn't been processed? Is there a specific issue that needs to be addressed? I would appreciate it if you could let me know when I can expect the money.

I value our relationship and hope we can resolve this matter promptly. Please let me know how we can handle this without further escalation.

Best regards,

(Your Name)
(Your Agency/Business Name)

5. Send a Final Demand Letter Stating Intent to Sue After 40 Days of Unpaid Invoice

When all previous efforts to collect payment have failed, send a final demand letter. 

A final demand letter is similar to a debt collection letter. The only difference is that it states your intent to take legal action if the debt is not settled on a specified date. 

This letter is the last formal notice before initiating a lawsuit and should be enough to prompt the client to pay. 

Reaching this point means that the client has either wholly ignored all your attempts to resolve the issue or outright refuses to pay without a valid reason. Here’s what your final demand letter should include: 

• Reiterate the invoice number and clearly state how long the payment has been overdue. Attach the invoice once again. 
• Summarize the previous attempts you made to collect the payment. 
• Provide a final deadline for payment, typically within 7-10 days of receiving the letter. 
• Mention that you will take legal action if the payment is not received by the new deadline. 
• Mention that you’ve consulted your attorney, and they’re ready to escalate the issue in a small claims court. You can also let your attorney write and send the letter to add weight to the severity of the situation. 

Final Demand Letter Template to Handle Client Payment Issues: 

Subject: Final Demand: Immediate Payment Required for Invoice (#InvoiceNumber)

Dear (Client's Name),

This letter serves as a final demand for payment regarding invoice (#InvoiceNumber), which was initially due on (Due Date). As of today, this payment is (number of days) overdue. Despite multiple reminders and our previous communications, the outstanding amount of (Total Amount Due) remains unpaid.

If the full payment is not received by (Final Deadline Date), I will have no choice but to pursue legal action to recover the debt. I have informed my attorney about the situation, and they are prepared to initiate legal proceedings. Please note that this may result in additional costs to you, including but not limited to legal fees and interest on the overdue amount.

I strongly urge you to settle this matter before (new deadline) to avoid escalation. Contact me via (email/phone call) to discuss this or make immediate arrangements for payment.

Best regards,

(Your Name)
(Your Agency/Business Name)

6. Escalate by Taking Legal Action and Filing a Lawsuit After 60 Days of Unpaid Invoice

When all efforts to collect payment fail, sue them. This could be 30 to 60 days after an invoice remains unpaid. Here's how to handle unpaid invoices by filing a lawsuit: 

• Consult an attorney with business or contract law expertise to assess the strength of your case, the potential costs, and the likelihood of success. They can also guide you on the legal requirements for filing a lawsuit in your jurisdiction. 

For context, the type of court you file your lawsuit depends on the money owed. For an amount between $2,500 and $25,000 in the US, it's a Small Claims court. In the UK, you can file a lawsuit for anything up to £10,000 in a Civil Money Claim, the UK equivalent of Small Claims Court. 

For large claims above $25,000, you can file in a court with jurisdiction over the dispute, typically the civil courts. 

• Decide where to sue. Generally, you can sue the client where your business is based or in the jurisdiction where the client's business is located. Consult your attorney while deciding where to sue, and consider factors such as convenience, cost, and the specific jurisdiction's laws. 
• Once you file a lawsuit, the court will issue a summons, which will be served to the client. The client must respond to the summons and appear in court. If the client does not respond or appear, the court may issue a default judgment in your favor, meaning you win the case by default. 
• While preparing for the lawsuit, ensure you have all documentation in order. This includes contracts, invoices, correspondence, and records of your attempts to recover the debt. 

Your attorney will help with filing the complaints. 

• Once the lawsuit is filed, the legal process begins. The court schedules hearings, and both parties have the opportunity to present their case. Depending on the case's complexity, this process can take several months. 

If the court rules in your favor, the client will be legally obligated to pay the amount owed, plus any additional costs awarded, such as legal fees and interest. 

What happens if the client does not respond to summons or pay? 

If the client doesn't appear in court, the court may rule the judgment in your favor. If the client doesn't pay, depending on the jurisdiction, they can enforce it through wage garnishment, liens on property, or seizing their assets. 

• Wage Garnishment allows you to collect owed money directly from the client's wages. Here, the court orders the client's employer to withhold a portion of their salary and send it to you until the debt is fully paid. 
• A Property Lien is a legal claim against the client's property (home or real estate). If the client sells the property, you can receive payment from the sale. 
• Seizing assets: In some cases, you may be able to seize the client's assets. These could be vehicles, equipment, or other valuable items that satisfy the judgment. 

However, we must mention that suing a client in another country is tricky. International laws require careful consideration, so get additional legal help to navigate the complexities. 

7. Hire a Debt Collection Agency as the Last Resort: 

If everything fails. Even the court couldn't help enforce the judgment. Consider hiring a collection agency. 

A collection agency is a third-party company that specializes in recovering unpaid debts. It has the means, expertise, and legal knowledge to pursue payment aggressively. 

These agencies work on a contingency basis, meaning they only get paid if they successfully collect the debt. Their fee is a percentage of the amount recovered, ranging from 20% to 50%, depending on the complexity and amount of the debt. 

Also, hiring a collection agency means transferring the debt to them. To support your claim, you must provide all relevant documentation (invoices, contracts, communication records, and legal documents). 

The agency will do its best to ensure that they negotiate or get full payment for you. 

Regardless of the outcome, whether they are successful or not, there are things you should do to protect yourself before potentially dealing with non-paying clients. 

Things to Do Before You Start to Work with a Client 

• Write a detailed contract that expresses your payment terms, due dates, accepted payment methods, and any penalties for late payments. Make sure they understand and agree to these terms before you start work. 
• Provide a specific payment schedule. This could include installment payments at specific milestones, a percentage upfront, or payment on a specific day of the month. Many companies use the Net 15 schedule and some agencies charge 50% upfront. 
• To encourage timely payments, set penalties for late payments. You can structure this however you like. For example, charge a fixed late fee each day the payment is overdue. 

To motivate clients to pay on time, you can charge $25 weekly for late payments or a percentage of the invoice amount (1% to 5% per month of delay). 

If an invoice of $1,000 is unpaid for a month, a 2% penalty would add $20 to the total owed. Depending on how you want to phrase your terms, you can also have a 5-10-day grace period before penalties are applied. 

• Issue invoices as soon as the project is completed. This helps ensure that the details are fresh in their minds and reduces the likelihood of disputes over the amount billed. 
• Ensure your invoices contain all required details (business name, contact information, project name, and any specific information the client may need). This minimizes delays caused by missing information. 

This is what a client invoice on ManyRequests could look like: 

• Clearly state the payment due date on the invoice. Use straightforward language like "due date (30 days after the invoice date)" instead of "Net 30" to avoid confusion. 
• Follow up regularly to ensure the client is satisfied and reminded of the invoice. 
• Use ManyRequests automated invoicing software to send payment reminders before/after the due date. This feature is customizable based on your interests and reduces the administrative workload. 
• Allow multiple payment methods to introduce flexibility from the get-go. You can communicate this to the client before you start the project (it should be in your contract). 

FAQs 

1. What are the Common Reasons Clients Fail to Pay on Time? 

• The client is experiencing financial difficulties. One way to help with this is to develop a solid payment structure to clear your invoice.  
• If the client disagrees with the quality of work or the terms of service, refer them to the contract and show the work done. 
• You didn’t follow up on invoices, and the client forgot to pay. Use ManyRequests' billing & invoicing feature, with regular reminders, to make clients pay faster. 
• The client has a habit of paying suppliers late. To avoid this, include a late payment fee in your contract. 

2. What should be included in a contract to prevent non-payment issues? 

• Payment terms and late payment penalties 
• Scope of work (to avoid disputes about what was agreed upon). Use the ManyRequests Service feature to design a detailed proposal that captures the scope of work. 
• Invoicing schedule (milestone-based or project-based payment schedule). 
• Information on how to resolve disputes, if any, in the future. You should also specify the legal jurisdiction and governing law under which the contract is enforceable. 
• Add a termination clause. 

3. When should you consider hiring a collection agency?

Hire a collection agency when all efforts to collect a debt have failed, and the client continues to ignore emails or refuse payment. It’s ideal to do this when your invoice remains unpaid 60-90 days after the due date. 

4. When should you give up on a client who hasn't paid? 

Giving up is difficult, but you can give up when you have: 

• Exhausted all reasonable efforts detailed in points 1-5 
• When the cost of legal action exceeds the debt 
• When the client's business has gone bankrupt 
• If the invoice remains unpaid for 6-12 months or more 
• If the relationship with the client has deteriorated to the point where it's clear that no further business will occur, and all attempts at negotiation have failed. 

Conclusion 

Dealing with a non-paying client can be frustrating and ugly, and it can make you feel cheated. If regular reminders don't work, contact higher-ups in the client's company or issue a formal debt collection letter to escalate the situation. When all else fails, take legal action or hire a collection agency. 

Regardless of your efforts to receive what you’re owed, know when to step back and recognize that pursuing the debt may not be worth the cost or stress. But by writing clear contracts and payment terms from the outset, you can prevent client payment issues before they start. You can also sign up for a 14-day free trial to manage clients, payments, and projects with ManyRequests.