How to Take Legal Action for Non-Payment of Invoices

Taking legal action for non-payment of invoices begins with a structured, step-by-step approach that protects your business and increases your chances of recovering funds. Review the invoice and contract to confirm accuracy and enforceability, then send a formal demand letter outlining the outstanding amount and consequences of non-payment. Keep detailed records of all communications and payment attempts, consider mediation if possible, and, if necessary, file a claim in the appropriate court.

Review the Invoice and Contract

Before pursuing legal action, confirm that your invoice and contract are accurate and enforceable.

Checklist:

• Ensure the invoice includes correct client information, invoice number, issued date, due date, and payment terms.
• Verify that the client agreed to your services or products and signed a contract, email confirmation, or agreement.
• Confirm that all work billed has been delivered and accepted.

Example: A contractor billed $5,000 for remodeling work. Before legal action, they ensure the invoice matches the signed contract specifying the scope, timeline, and payment terms.

Send a Formal Demand Letter

A formal demand letter is a professional way to request payment before escalating to court.

What to include:

• Invoice details (number, date, amount)
• Services or products delivered
• Payment due date and terms
• A clear request for payment
• Consequences of non-payment (late fees, legal action)

Example:

Dear [Client Name],
Invoice #2025-015 for $2,500 was due on March 15, 2025. Please remit payment within 10 business days to avoid further action.

Sending this letter via certified mail or email with read receipt ensures there’s proof the client received it.

Keep Records of All Communication

Documentation is very important if legal action becomes necessary.

What to record:

• Emails and letters sent to the client
• Notes from phone calls
• Copies of the invoice and contract
• Any partial payments or disputes

Example: A contractor documents all attempts to collect a $3,000 invoice, including emails sent on March 20, March 25, and April 1, plus phone call notes. This creates a paper trail that supports your case in court.

Attempt Mediation or Alternative Dispute Resolution

Before going to court, consider mediation or arbitration. Many clients respond more favorably to this approach, and it’s usually faster and less expensive than litigation.

• A neutral third party helps both sides negotiate
• Can prevent damage to business relationships
• Documentation from mediation can support legal proceedings if needed

Example: Two parties agree to mediation through a local business association to resolve a $4,000 invoice dispute before filing a claim in court.

File a Claim in Small Claims or Civil Court

If all informal attempts fail, you may need to escalate to court. The type of court depends on the invoice amount and local laws.

Steps:

1. Determine the correct court for your claim (small claims for lower amounts, civil court for higher amounts).
2. Complete and file the necessary forms with the court.
3. Pay filing fees (often recoverable if you win).
4. Serve the client with a copy of the complaint.

Example:

Step 6: Prepare Your Case

Gather all documentation and evidence to present to the judge or arbitrator.

Include:

• Signed contract or agreement
• Copies of invoices
• Records of payment attempts
• Communication logs (emails, letters, calls)
• Any proof of delivery of goods or services

Example: A contractor presents signed contracts, an invoice for $6,500, email reminders, and delivery receipts during the court hearing.

Attend the Hearing

During the hearing:

• Present facts clearly and professionally
• Show all evidence logically
• Explain the timeline of work, invoicing, and payment attempts
• Be prepared for client counterarguments

Judges often favor businesses with well-documented invoices and communication history.

Enforce the Judgment

If the court rules in your favor, you may need to take steps to collect the awarded amount, such as:

• Wage garnishment (where allowed)
• Bank account levies
• Property liens

Keep in mind that legal fees and collection efforts can vary depending on jurisdiction.

Learn and Prevent Future Issues

After resolving the dispute, implement measures to prevent non-payment:

• Use contracts with clear payment terms
• Send professional, detailed invoices promptly
• Use deposit or milestone payments for large projects
• Vet clients before starting work