What to do when a customer will not pay your invoices

How do I deal with customers that will not pay?One of the most frustrating things that can happen to a business is when a customer refuses to pay an invoice. This can leave the business owner out of pocket and, in some cases, insolvent.

There are a few things that you can do if you find yourself in this situation. Firstly, you should try to negotiate with the customer. If they are genuinely unable to pay, they may be willing to arrange a payment plan. If this is not possible, you may need to take legal action.

This can be expensive and time-consuming, but it may be the only way to get the money that you are owed. In some cases, customers may refuse to pay because they are insolvent.

In this case, you can apply to the court for an order that allows you to take control of their assets. This is known as an insolvency order. If you are successful, you will be able to sell their assets and use the money to pay off your outstanding invoices

How do I deal with customers that will not pay?

When a customer refuses to pay an invoice, it can be a stressful and frustrating experience. However, there are a few steps that businesses can take to try to resolve the situation. First, it is important to remain calm and professional. If possible, reach out to the customer directly to see if there is an issue with the invoice or if there has been a mistake.

If you are unable to resolve the issue amicably, you may need to take legal action. This can be a long and costly process, so it is important to weigh all of your options before taking this step. In some cases, businesses may be able to work with a collections agency to recoup the owed funds. Ultimately, each situation is unique, and businesses will need to decide what course of action is best for them.

Issue a 7-day Payment request before action

Whenever a business has an outstanding debt, they will usually send a letter before action as a way to collect payment. This is also commonly known as a demand letter, and it notifies the debtor that they have a certain period of time to pay the debt in full. If the debt is not paid within this timeframe, then the business may take legal action against the debtor.

While sending a letter before action is often seen as a last resort, it can be an effective way to collect payment from a delinquent debtor. In many cases, the debtor will either pay the debt in full or set up a payment plan after receiving a demand letter. Either way, the business is more likely to receive the money that they are owed

Submit a Small Claims Court N1 form if less than £10,000

You may be able to submit a Small Claims Court N1 form if you have been the victim of a minor civil offence. For example, if you have been involved in a car accident and the other driver was at fault, you could submit this form to claim damages. The N1 form can also be used if you have been the victim of a breach of contract, such as non-delivery of goods or services.

In order to submit an N1 form, you will need to fill out some basic information about yourself and the offence. Once the form is complete, you will need to file it with your local court or online at HMCS claim online. A small claims court judge will then review your case and decide whether or not to issue a judgment in your favour.

If you are successful, the other party will be ordered to pay you damages. However, if your claim is unsuccessful, you may be responsible for the other party’s legal costs. As such, it is important to consider all of your options before deciding whether or not to submit an N1 form.

How much will taking legal action cost?

That are a number of factors such as:

  • What actions your customer takes.  If they pay up as soon as they get notification of court action, you won’t have to go any further, so this will cost you less than if they defend the claim
  • Whether your claim is successful or not. If you win the case your customer will usually have to pay your court fees; if you lose you may end up paying all your costs, court fees and also the customer’s costs, which can be expensive for higher claims
  • The amount you’re trying to recover. There’s a sliding scale of court fees according to the value of the claim, ranging from £35 for amounts up to £300, through £115 for amounts of £1,500 – £3,000, to 5% of the value for amounts of £10,000 – £100,000
  • How much you do yourself as opposed to involving others, such as solicitors. Many firms will have sliding fee scales, e.g. to initiate court action to attempt to recover a sum of £500 they might charge £150; for a sum of £5,000 they might charge £250; for a sum of £15,000 they might charge 5% of the amount.

Read more: Client not paid due to lack of funds

Amount is Greater than £5,000 then Issue a Statutory Payment Demand

If the client owes you more than £5,000 and not responding to your 7 day letter then your next step should be to serve a statutory payment demand. This is a formal document that requests payment of the amount due within 21 days. If this payment request is not met then you would have grounds to present a winding up petition in Court.

We understand that invoice payments that are unpaid can be a major burden on a business, especially when cash flow problems are already present.


In conclusion, dealing with customers who refuse to pay your invoices can be a challenging situation for any business. However, it is essential to take proactive steps to address the issue and protect your financial interests. Here are some key takeaways and actions to consider:

  1. Communication is key: Reach out to the customer promptly and professionally to inquire about the payment status. It is possible that there might be a genuine oversight or a misunderstanding that can be resolved through open dialogue.
  2. Review your contract and invoice terms: Ensure that your invoices clearly state the payment terms and due dates. If necessary, provide evidence of the agreed-upon terms to the customer to support your case.
  3. Document all interactions: Keep a detailed record of all communication and interactions with the customer regarding the outstanding payment. This documentation can be useful if the situation escalates and legal action becomes necessary.
  4. Consider negotiation and compromise: If the customer is facing financial difficulties, explore the possibility of negotiating a partial payment or setting up a payment plan. Finding a mutually beneficial solution can help salvage the business relationship and recover at least a portion of the owed amount.
  5. Enforce late payment penalties: If your contract or invoice terms specify late payment penalties, assert your right to enforce them. Clearly communicate the consequences of non-payment, such as additional fees or interest charges, to the customer.
  6. Seek legal assistance if necessary: If all attempts at resolving the matter amicably fail, you may need to pursue legal action. Consult with a lawyer experienced in commercial law to understand your rights and options. They can guide you through the process of sending formal demand letters, filing a lawsuit, or seeking alternative dispute resolution methods.
  7. Protect future transactions: Conduct thorough background checks on potential customers before engaging in business with them. Consider implementing stricter credit terms or requesting partial upfront payments to mitigate the risk of non-payment.

Remember, every situation is unique, and there is no one-size-fits-all solution. It’s crucial to assess each case individually and determine the best course of action based on the circumstances and your business’s needs.

By staying proactive, maintaining clear communication, and being prepared to take appropriate measures, you can increase your chances of resolving payment issues and protecting your business’s financial stability.

Business Finance specialist at Invoice funding | + posts

Seasoned professional with a strong passion for the world of business finance. With over twenty years of dedicated experience in the field, my journey into the world of business finance began with a relentless curiosity for understanding the intricate workings of financial systems.

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