What to Do When a Client Won't Pay: Legal Steps & Solutions

When Clients Don't Pay

Non-payment is one of the most frustrating challenges for freelancers and small businesses. This comprehensive guide covers everything from prevention to legal action.

Step 1: Verify the Situation (Days 1-7)

Before Taking Action, Confirm:

Invoice was sent: Check your sent folder
Correct email address: Verify recipient
Invoice was received: Ask for confirmation
Payment terms are clear: Review what was agreed
Work was completed as agreed: No disputes about quality

Common Innocent Reasons for Non-Payment:

Invoice went to spam
Wrong person received it
Client forgot
Processing delays
Accounting department backlog

Step 2: Friendly Reminder (Days 7-14)

First Reminder Email Template:

Subject: Friendly Reminder - Invoice #2025-089 Due Today

Hi [Client Name],

I hope this email finds you well! I wanted to send a friendly reminder that Invoice #2025-089 for $2,500 was due today.

I've attached the invoice again for your convenience. If you've already sent payment, please disregard this message and accept my thanks!

If you have any questions about the invoice, please let me know.

Best regards,
[Your Name]

Step 3: Follow-Up (Days 14-21)

Second Reminder - More Direct:

Subject: Payment Overdue - Invoice #2025-089

Hi [Client Name],

I'm following up on Invoice #2025-089 for $2,500, which is now 14 days overdue.

Could you please let me know when I can expect payment? If there's an issue with the invoice or the work delivered, I'd like to resolve it as soon as possible.

Invoice Details:
Invoice #: 2025-089
Amount: $2,500
Original Due Date: [Date]
Days Overdue: 14

Please remit payment by [Date] to avoid late fees.

Thank you,
[Your Name]

Step 4: Phone Call (Days 21-30)

Call Script:

"Hi [Name], this is [Your Name] from [Your Business]. I'm calling about Invoice #2025-089 for $2,500 that's now 3 weeks overdue. I've sent several emails but haven't received a response. Can you help me understand what's happening with this payment?"

During the Call:

Stay calm and professional
Ask questions: "Is there a problem with the invoice?"
Listen: There may be a legitimate issue
Get commitment: "When can I expect payment?"
Offer solutions: Payment plan if needed
Document everything: Take notes

Step 5: Formal Demand Letter (Days 30-45)

Demand Letter Template:

[Your Name]
[Your Address]
[Date]

[Client Name]
[Client Address]

RE: FORMAL DEMAND FOR PAYMENT - Invoice #2025-089

Dear [Client Name],

This letter serves as formal demand for payment of Invoice #2025-089 in the amount of $2,500, which is now 30 days overdue.

Invoice Details:
Invoice Number: 2025-089
Invoice Date: [Date]
Due Date: [Date]
Amount Due: $2,500
Late Fees: $75
Total Amount Due: $2,575

Services Provided:
[Detailed description of work completed]

Despite multiple attempts to contact you via email and phone, this invoice remains unpaid. I have fulfilled all obligations under our agreement dated [Date], and payment is now significantly overdue.

DEMAND FOR PAYMENT:
You must remit full payment of $2,575 within 10 business days of the date of this letter (by [Date]).

CONSEQUENCES OF NON-PAYMENT:
If payment is not received by [Date], I will have no choice but to pursue the following actions:

Report this debt to credit bureaus

Engage a collection agency

File a lawsuit in small claims court

Seek recovery of all legal fees and court costs

I prefer to resolve this matter amicably. Please contact me immediately at [Phone] or [Email] to arrange payment.

Sincerely,

[Your Signature]
[Your Printed Name]

Sent via Certified Mail, Return Receipt Requested

Important:

Send via certified mail: Proof of delivery
Keep a copy: For your records
Be specific: Include all details
Set a deadline: Typically 10-14 days

Step 6: Collection Agency (Days 45-60)

How Collection Agencies Work:

They take a percentage: Typically 25-50% of collected amount
No upfront cost: Only pay if they collect
They handle communication: You're hands-off
They report to credit bureaus: Damages client's credit

Top Collection Agencies:

TrueAccord: Tech-forward, ethical collections
Rocket Receivables: Small business focused
National Credit Systems: Established, reliable

Pros and Cons:

Pros:

Professional handling
Higher success rate than DIY
Saves your time
No upfront cost

Cons:

You only get 50-75% of amount
Relationship with client is over
They may not collect anything

Step 7: Small Claims Court (Days 60+)

When to Consider Small Claims:

Amount is under your state's limit ($5,000-$10,000 typically)
You have clear documentation
Client is local (same state)
Other methods have failed

Small Claims Court Process:

1. File Your Claim

Visit your local courthouse or file online
Fill out claim form with details
Pay filing fee ($30-$100)
Serve defendant (client) with papers

2. Prepare Your Case

Gather evidence:

Original contract or agreement
All invoices
Email correspondence
Proof of work completed
Payment reminders sent
Demand letter

3. Court Hearing

Arrive early, dress professionally
Bring all documents (3 copies: you, defendant, judge)
Present your case clearly and calmly
Stick to facts, avoid emotion
Answer judge's questions directly

4. If You Win

Judge issues judgment in your favor
Client has X days to pay (varies by state)
If they don't pay, you can pursue wage garnishment or bank levy

Small Claims Tips:

Be organized: Clear timeline of events
Be professional: No badmouthing client
Be prepared: Practice your presentation
Bring evidence: More is better
Know your state's limits: Don't exceed maximum claim

Alternative Solutions

Payment Plans

If client is willing but unable to pay in full:

"I understand you're having cash flow issues. I'm willing to accept a payment plan:

$833/month for 3 months

First payment due [Date]

If you miss a payment, full balance becomes due immediately"

Partial Settlement

Accept less than full amount to close the matter:

"I'll accept $2,000 as full payment if you pay within 7 days. After that, I'll pursue the full $2,500 plus legal fees."

Trade/Barter

If client has services or products you need:

"I'll accept $1,500 worth of your [product/service] plus $1,000 cash as payment."

Preventing Non-Payment

Before Starting Work:

Written contract: Always, no exceptions
Research client: Google them, check reviews
Require deposit: 25-50% upfront
Clear payment terms: In writing
Trust your gut: Red flags are real

During the Project:

Document everything: Emails, calls, changes
Progress payments: Bill at milestones
Get approvals in writing: For all deliverables
Communicate regularly: No surprises

When Invoicing:

Invoice immediately: Don't delay
Clear payment terms: Due date, methods, late fees
Professional invoices: Use software like InvoiceKit
Multiple payment options: Make it easy
Automated reminders: Don't rely on memory

Red Flags to Watch For

Client refuses to sign contract
Vague about budget or payment terms
History of negative reviews
Constantly changing scope without discussing payment
Difficult to reach or slow to respond
Asks you to start work before contract is signed
Promises to pay "when they get paid"

Legal Considerations

Statute of limitations: Varies by state (typically 3-6 years)
Interest on overdue invoices: Check state usury laws
Collection laws: Fair Debt Collection Practices Act
Mechanic's liens: For construction/improvement work
Consult attorney: For large amounts or complex situations

When to Walk Away

Sometimes it's not worth pursuing:

Amount is very small (under $500)
Client has no assets (can't collect anyway)
Client is out of state (jurisdiction issues)
Your time is worth more than the amount
Stress isn't worth it

Tax Deduction:

You can write off bad debt as a business expense on your taxes. Consult your accountant.

Conclusion

Non-payment is frustrating but manageable with the right approach. Start friendly, escalate gradually, and know your legal options. Most importantly, prevent non-payment with clear contracts, deposits, and professional invoicing. Use InvoiceKit to create professional invoices with clear payment terms and automated reminders!