How Can My Business Collect on Payment?

A practical guide to recovering what you’re owed—without burning bridges.

1. Start with a Friendly Reminder

Before jumping into legal action, begin with a professional, low-pressure reminder. In many cases, a simple nudge can resolve the issue.

Tips:

• Send a polite email referencing the invoice, due date, and payment method

• Include a copy of the invoice and any relevant contract terms

• If email doesn’t work, call or text your contact to confirm they received it

  
  

Why it works: Sometimes people just forget, misplace invoices, or have internal processing delays. You don’t want to escalate too soon.

2. Move to a Formal Demand

If your reminders are ignored, the next step is a demand letter. This is a written notice that formally requests payment and puts the other party on notice that you’re considering legal action.Your demand letter should include:

• A clear statement of the amount owed

• Reference to any applicable contract, invoice number, and due date

• A deadline for payment (typically 7–14 days)

• A note that further legal steps may follow if payment isn’t received

Pro tip: A letter on legal letterhead from your attorney often carries more weight than one from your own email address.

3. Consider Settlement or Payment Plans

If the debtor responds but can’t pay in full, consider whether a partial payment or installment plan is better than continuing to chase the full amount.

This can be a win-win:

• You recover some or most of the money

• They avoid legal escalation

• The business relationship may be preserved.

Just be sure to put any new payment terms in writing, and have both parties sign.

4. Use a Collection Agency (With Caution)

If you're hitting a wall, you might consider a third-party collections firm. These companies pursue the debt on your behalf—sometimes buying it outright for a fraction of the value.

Pros:

• Removes the burden from your team

• Signals seriousness to the debtor

Cons:

• Can damage the customer relationship

• You may only recover a percentage of what’s owed

• Agencies must follow federal and state debt collection laws (e.g., FDCPA)

5. Take Legal Action as a Last Resort

If the amount is substantial and the debtor refuses to pay, small claims court or civil litigation may be your next step.

In small claims court:

• You don’t need a lawyer

• There’s a limit (often $5,000–$10,000 depending on your state)

• The process is quicker and more informal

For higher amounts or more complex disputes, you may need to:

• File a lawsuit

• Attend mediation or arbitration

• Obtain a judgment in court

  
  

If you win, you may still need to enforce the judgment, which could involve garnishment, liens, or seizure of assets.

6. Prevent Future Payment Issues

Once you’ve gone through the stress of chasing a late payment, take steps to reduce the chances of it happening again.

Set yourself up for success by:

• Using clear, written contracts with payment terms, interest, and consequences for late payment

• Asking for deposits or upfront payment

• Sending automated reminders from invoicing software

• Offering incentives for early payment (like small discounts)

Final Thoughts

Every unpaid invoice is a risk—but it’s also an opportunity to strengthen your policies and processes. While not every client will pay on time, you can protect your business by combining professionalism, persistence, and legal tools.

Before going to court, try every reasonable path to resolution. But don’t hesitate to take firmer action when necessary—especially if you’re consistently not getting paid.

Need help drafting a demand letter or deciding if legal action is worth it? That’s a conversation worth having sooner rather than later.