You Have to Collect Those Unpaid Invoices – Here’s How

collect unpaid invoices

Whether it’s the hard work you’ve put in or a product you sold, there is nothing more frustrating than not getting paid. But, unpaid invoices can also have a crippling effect on your business. In fact, late payments cost small and mid-size businesses $3 trillion a year.

As a result, you aren’t able to pay your personal and professional expenses. That means you may also get hit with late fees or penalties. You may also have to put a freeze on hiring. And, this also hinders your business from growing since you can’t invest in new equipment or embark on marketing.

The simple fact is that when you send out an invoice it has to get paid promptly. The good news? You can employ a variety of methods to collect on those unpaid invoices.

Do a little digging.

Before doing anything, whether that’s freelance work or selling a product, you should know who you’re deadline with. Now, this doesn’t give you an excuse to get a little creepy here. But, you should check out their previous payment history.

Sometimes this is pretty straightforward. You can read client reviews on freelance sites like FlexJobs,, or We Woke Remotely. You could also ask your fellow freelancers or business owners if they’ve ever dealt with the client.

There is another option as well. You could use commercial credit reports from Ansonia, Dun & Bradstreet, and Experian. Besides being accessible, they’re affordable and easy-to-understand.

Taking this first step may cost your minor time and financial investment. But, if you want to avoid the hassle of dealing with deadbeat clients and customers.

Set clear terms.

If you feel comfortable preceding, then your next move is to set clear invoicing payment terms. After all, if you don’t then how will others know when and how to pay you? I mean you can’t fault them because you weren’t upfront from the get-go.

At the minimum, you should discuss all costs and payment terms in advance. For example, you should go over expectations and how you preferred to be paid. Ideally, the shorter, the better — as opposed to the traditional 30 or 60 days. It’s acceptable to request payment on receipt of the invoice, cash on delivery, or within the next 7 or 14 days.

I would recommend that you have this written down in a contract. It doesn’t have to be overly complex. But, it should outline deliverables, time frames, and how disputes will be handled.

Bill upfront.

Perhaps one of the easiest ways to protect yourself is by requiring some sort of payment ahead of time. One example would be a payment in advance.

“Payment in advance, PIA for short, is simply a payment that is made ahead of schedule,” explains Due co-founder John Rampton. “It’s not uncommon for business owners to require advance payments for their products or services.”

For example, if you’re a freelance graphic designer you could demand a “50% down payment before starting a project. Advances protect sellers against non-payments and to cover any out-of-pocket expenses.”

Even if you don’t ask for that much, it wouldn’t hurt to request a deposit. It could be something as small as 10%. While that may not seem like much, it’s better than nothing. More importantly, though, it’s a way to test others. If they can’t pay that, then how can they be trusted to pay the entire invoice?

Be polite and persistent.

Here’s the thing with unpaid invoices. They’re just not going to magically pay themselves. As such, you need to grab the bull by the horns if you want to be paid.

At the same time, you don’t want to be too aggressive. While it’s acceptable to send an email, handwritten letter, or call them directly you don’t want to bombard them with angry messages. In fact, a simple “please pay your invoice within…” and “thank you for your business” can increase the percentage of invoices that are paid by more than 5 percent.

Why’s this the case? Well, it’s an effective way to strengthen relationships. However, other research shows that using “please” and “thank you” make you appear more credible and reliable.

Set up automated reminders.

While you definitely need to follow-up on any standing invoices, sometimes you just don’t have the availability to do this frequently. To solve this problem set up automated payment reminders.

If you’re using a top-notch accounting tool, such as Due, you easily generate customized payment reminders. That means you can determine the time and frequency you would like to send out. And, if you’re going to continue working with this client you can set recurring payments so that this is no longer a problem.


I get it. You would prefer to only accept a handful of payments. Maybe it’s because you’re comfortable with the method or don’t want to worry about processing fees. But, the more options you offer, the more likely you’ll get your invoice paid.

Additionally, you may want to consider options like a payment plan. Again, it’s better to get some cash flowing into your business instead of nothing. Moreover, you may want to explore invoice factoring if you need money right now.

Charge late fees.

No one wants to be hit with late fees. I mean why pay more money on an invoice then you have to?

However, you also don’t want to surprise the other party. So, make sure that you lay this out in your payment terms or contract. For example, if an invoice isn’t paid after a week then they’ll be charged either a flat fee or a percentage of the project’s final cost. It’s usually industry standard to charge 5 or 10 percent.

Hire a debt collector.

What if you’ve done all of the above and still the invoice hasn’t been paid? You may want to turn to outside help. Specifically, you may want to hire a professional debt collector.

They know how to track down payment and are probably more relentless then you are. Besides, this frees up your time so that you focus on other facets of your business. Just keep in mind that when the debt is collected you will have to pay them a fee — usually a percentage of what was collected.

Engage in legal proceedings.

“If you know the client has the money to pay you, or you think the client will have the money some time in the future, don’t give up,” writes Stephen Fishman, J.D. for NOLO. “There are a number of legal means available to collect debts.”

  • Sue the client in small claims court. As long as the debt isn’t too large, you can take the client to small claims court. “All states have small claims courts that are set up to resolve disputes involving relatively modest amounts of money,” adds Fishman. “The limit is normally between $2,000 and $7,500, depending on your state.”
  • Sue the client in superior court. “If the client owes you substantially more than the small claims court limit for your state, you may wish to sue in a formal state trial court, usually called the municipal court or superior court,” he writes. “Debt collection cases are often very simple, so you can probably handle them yourself or hire a lawyer for the limited purpose of giving you advice on legal points or helping with strategy.”
  • Take the client to arbitration. “Arbitration is similar to small claims court in that it’s intended to be speedy, inexpensive, and informal,” explains Fishman. “The main difference is that an arbitrator, not a judge, rules on the case. An arbitrator’s judgment can be entered with a court and enforced just like a regular court judgment.” But, if there is an arbitration clause in your contract you can not go this route.

“If the client has gone out of business or vanished from the face of the earth, or you know that he or she will likely never be able to pay you anything (either now or in the future), your best option may be to write off the debt,” recommends Fishman. “As the old sayings go, you can’t get blood out of a turnip — and you shouldn’t throw good money after bad.”