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Non-payment of invoices: how to take legal action and get paid

Collecting payment on invoices is a common problem among many businesses. We have prepared a brief summary of the steps you can take in seeking payment.

Assess what is owed to you and chances of recovery

Begin by reviewing the correspondence between you and your customer. Have they paid on time in the past? Are they in financial trouble? Would a payment schedule help them gradually pay off their debt? Consider suggesting a creative compromise before taking legal action, especially if maintaining a good working relationship is important to you.

Next, determine the total of all unpaid invoices, minus any partial payments that the customer has made. Assess your customer’s financial situation before proceeding to the next step. You may have a claim, but the costs of collecting payment could outweigh what is owed to you. Moreover, your chances of collection may be slim if your customer already has a lot of debt or is facing bankruptcy.

Demand letter

Once you have decided that you would like to proceed with collecting payment, start by writing a demand letter to your customer. If you are writing to a business, you may also include the name of the individual whom you had contact with, or who provided a personal guarantee for the goods/services provided. In your letter, you should include:

  • Amount owed, including particulars such as invoice numbers and dates;
  • Demand payment by a certain date in the future; and
  • Advise that failure to pay may result in legal action.

Commencing legal action

If you have not been paid after the expiry of the period outlined in your demand letter, you may choose to proceed with a legal action. Depending on the amount claimed, you will file a claim in the Small Claims Court, or Superior Court of Justice. In some cases, you may also collect your legal costs and disbursements, such as court filing fees.

Enforcing judgment

After obtaining judgment, you can begin enforcement. Depending on the customer, you may be able to enforce judgment by:

  • Garnishing wages;
  • Obtaining a lien on their property; or
  • Obtaining writs of execution (directing the local sheriff to seize or sell assets).

Seeking help

We know that collecting payment can be stressful, and that you want to focus on running your business. Our firm has extensive experience representing businesses of all sizes in collecting payment of invoices. Please contact a member of our Commercial Litigation team for more information.