What happens when a customer refuses to pay your invoice? What steps can you take to get the money your business is owed? Customers are a crucial part of every business but when they don’t pay, it can be extremely frustrating.

Within some industries, avoiding payment is very difficult. In cases where payment is due at the point of the transaction, failing to pay is seen as a criminal offence almost immediately. Imagine a customer intentionally not paying for a bag full of shopping in the supermarket – he/she would be instantly charged with theft. Likewise, ignoring the bill in a restaurant and leaving the premises would result in the offence known as ‘making off without payment’.

However, many businesses which offer services or some products will send their clients invoices at the end of each month or when the job has been completed. If they then decide to refuse to pay your invoice it becomes more complicated than the examples given above.

how to ask client for payment

So what happens if a customer doesn’t pay?

Dealing with a customer who won’t pay their invoices can be difficult. Everyone who is self employed or owns a small business will come across a client who refuses to pay their bill at some point or another.  There are several steps that you can take to resolve this issue, depending on how much money is owed, how much paperwork you have and the reasons the customer is avoiding making payment. Firstly you have to understand that there are usually three types of people when it comes to refusing to pay:

  • They are not happy with the service or product you have delivered. 

If the customer is refusing to pay the outstanding invoice due to themselves not being happy with work carried out or the product provided you will have to find out why. Once you understand in greater depths their issue you can then hopefully move towards an amicable solution. This may be replacing the product or simply going out to see the customer to look over the work that has been done. It may be that they have misunderstood something and you just need to explain it to them.

  • They have no money to pay.

 It can be difficult to believe however sometimes the honest answer is that they just don’t have the money to pay you. Whether they never intended to pay you in the first place or whether they’ve been caught short in the middle of the process. This client can be the most tricky as you can’t receive money that isn’t there. The best solution in this case may be to set up a payment plan, this way you don’t lose the money you’re owed and the client can pay at a comfortable pace.

  • They just don’t want to pay.

These type of customers are usually the most common. Some just like to try it on to see whether they can get away without paying anything or they want to work you down on the amount they owe. If you’ve done the work as agreed or the product was as described there is no reason why you should not demand payment in full. Sending a letter of further action may spur them on.

Communicate with your client

Communicating with your client can be the quickest and easiest method to solve payment issues. Explain the invoice to them and ask why they haven’t paid it yet. Sometimes clients have genuine reasons for not paying on time and listening to what they have to say can solve the problem without causing any distress. You may have to work out a payment plan with the client if money is an issue for them, this is a good solution for you both as it won’t damage your working relationship, the client will be able to comfortably pay the debt, you wouldn’t have to take them to court and you still get the money you’re owed. Even though it would be ideal to have full payment right away, getting paid eventually is better than receiving nothing at all.

If a payment is overdue, you should first send them a reminder of the invoice to let them know. In some cases, the client has genuinely forgotten about the outstanding invoice so accusing them of intentionally avoiding the payment could damage customer rapport. Before taking the case further some businesses like to send 2-3 reminders but if the client continues to ignore these you should then attempt to contact them using a different method via call or post. Its important to be persistent. If you can’t get hold of the client, continue to call them everyday. It would also be advisable to send letters signed for. That way you know that the customer has received your letter and you can keep proof of that if they continue to ignore you. Also keep records of any reminders you send or any calls you make, this will all help if you have to take the case to court.

If you have had no luck contacting your client you should mention in one of your reminders/letters that further action will be taken if they do not settle the amount owed within a certain time period (normally 7-14 days).

Take legal action

If the invoice has still not been paid after written warnings and an appropriate length of time, you can attempt to recover the money by firstly inviting your client to mediation if you don’t feel you want to take the case to court. This works best if the customer has a specific problem or reason for not wanting to pay the invoice. Your customer may be arguing that the work provided wasn’t sufficient, or perhaps he/she believes that the invoice is incorrect.

Mediation is a process whereby an objective person (solicitor or lawyer) helps the two parties to resolve the issue. In order for this to work as efficiently as possible, you should gather all the paperwork which relates to the customer’s case and take it to the mediation sessions. However, if the problem does not seem to have resolved itself somewhat after 1-2 mediation sessions, you should proceed with taking the case to court.

In the UK, this was previously known as going to the ‘small claims court’, and is done through your local county court. The court can then order the money to be paid. This is the best option if the amount owed is less than £750.

If you are owed more than £750, you can issue a statutory demand to the individual or company which owes you the money. This means the client has 21 days to either pay the debt they owe you or reach an agreement to pay. A court hearing will be arranged (normally within 10 days) to deal with your case.

While most customers will take heed to statutory demands, there are steps you can take if the client ignores this demand for more than 21 days. You can either;


Start the process to ’wind up’ a company if they owe you £750 or more. (meaning the company could be forced into liquidation)


Start bankruptcy proceedings (if they owe you more than £5000)

Compulsory liquidation also known as ‘winding up’ a company, allows the court to close the company if it cannot pay the debts it owes. This process is usually a last resort to get paid by either forcing the company to act or gaining access to the companies assets.

To proceed with compulsory liquidation you must be owed a minimum of £750 and have waited at least 21 days to have been paid (serve a statutory demand).

The procedure starts by presenting a petition (application) at court, this is when the judge will decide if it is appropriate to make a winding up order. I this is successful, the companies assets are sold and you and any other creditors are paid.

When the company goes into liquidation all its assets are sold in order to pay all its creditors. Unsecured creditors rarely redeem all the money owed to them as they lie at the bottom of the payment hierarchy. So unfortunately it is not guaranteed you will be paid all or any of the money you are owed.

Bankruptcy. If you want to bankrupt an individual or company you need to present a bankruptcy petition to a court to prove they owe you more than £5000. The debtor must also serve a 21 day statutory demand. The application to the court will result in the companies assets to be taken and sold to pay their debts.

Once the bankruptcy is made, an official receiver takes control of the individual/company assets and decides whether the debtor has sufficient funds to repay creditors through monthly payments. The repayment process takes place in a strict order of priority. Creditors will make their claim for repayment using a ‘proof of debt’ form. Unsecured creditors rarely receive payment as they are at the bottom of the payment hierarchy.

Debt recovery agency. If you’d prefer to stay out of court, you can contact a debt recovery agency and ask them to work on your behalf. There will either be a fixed fee for the work they carry out, or they will take a cut of any money which they recover from the client on your behalf. This option means that you can continue running your business without using your valuable time trying to recover the debt personally.

What if you don’t have a contract?

You should never start work for anybody without having a contract in place, particularly if there is a large amount of money at stake. The lack of a contract, however, doesn’t necessarily mean that you can’t make a claim. If you can prove that you have carried out work which hasn’t yet been paid for, you could still have a strong case to present.

You should keep a record of all emails and other interaction between your business and the client. Don’t forget to also keep copies of any reminders you have sent and/or statutory demands.

Taking the necessary precautions

When running a business, it’s important to stay organised and make it as difficult as possible for clients to avoid paying you for work. No matter how nice somebody may seem, you should never assume that they will pay you what is owed.

You should hire a solicitor to draw up a generic contract for your clients. This should outline your terms and conditions, and you should retain a signed copy before starting any work.

As well as keeping the signed contract, take the time to get a copy of the invoice as well as any communication between you and the client. If most of this is done via email, it will be easy to find the documentation when you need it; however, if you are sending and receiving paper letters, you should keep them safe in a separate folder.

Finally, ask your clients to pay upfront for the work or as soon as the work is complete. While not all clients will be happy to do this, it certainly prevents customers from trying to avoid payment. If there is a contract in place, customers should feel that there is enough security for them to pay beforehand without the risk of losing their money. Whether it’s only half up front or just for materials at least you get something before you start. Once you’ve finished the job you can ask for payment, having a card reader available will make it harder for them to refuse.

The most important thing is to not to let it get to you. When a customer won’t pay it’s not just the money we look at but it’s the lack of respect and can become more about principle than the money itself. Sometimes if it’s for a small amount it just might not be worth your time and it’s better to just forget it. Hopefully Karma is real.