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The work's complete. You've delivered what was agreed. But the invoice sits unpaid, and your polite follow-ups aren't working. This situation is frustrating—and it affects your cash flow directly.
If you're dealing with a client who isn't paying, you're not just looking for what to do next. You want to understand your options, protect your position, and ideally prevent this from happening again. Every business encounters payment issues at some point. The difference is in how prepared you are to handle them.
This guide walks you through the practical steps to take when payment isn't coming through, explains your legal rights over work or goods you've supplied, and shows you how to build stronger payment protections into your contracts from the start. Together, we can work through both immediate recovery and long-term prevention.
Understanding Your Position and Options
Invest time in getting your payment terms right from the start. Work with a business lawyer to ensure your contracts include enforceable payment triggers, realistic milestone structures, and clear provisions about late fees and suspension rights. Register PPSR interests when you supply goods on credit, and maintain consistent invoicing systems that let you track and follow up promptly. These steps won't eliminate every payment issue, but they significantly reduce both the frequency and the difficulty of recovering what you're owed.
Before taking any action, you need to understand exactly what you agreed to. Start by reviewing your contract or engagement terms carefully. What payment terms were documented? Was there a signed agreement, or did you proceed on verbal understanding? Are there specific clauses about late fees, interest, or what happens if payment stops?
If your contract includes clear payment terms with specific due dates, late fee provisions, and consequences for non-payment, you're in a stronger position. If the scope was vague, payment terms unclear, or nothing was signed, recovery becomes more strategic. You still have options, but your approach needs to account for weaker documentation.
Check whether the invoice format matches what was agreed. Some contracts specify invoice requirements—certain details, formats, or delivery methods. If your invoice doesn't match those requirements, the client might have technical grounds to delay payment. Also review what communication has already happened. Have you sent reminders? Did the client respond with concerns about the work, or have they simply gone quiet?
Depending on your contract and the nature of what you've supplied, you may have rights that give you leverage for payment recovery. These aren't automatic—they depend on what your contract says and the specific circumstances.
Retention rights over deliverables can apply when you've completed work but haven't handed over the final product. If your contract states that deliverables won't be transferred until payment is received, you have a clear right to withhold them. This works well for intellectual property, designs, reports, or completed work product that hasn't been physically delivered. The key is having this documented in your terms before starting work.
Lien rights may exist over goods or materials in your possession. A lien gives you the right to retain physical items until you're paid for work done on those items or for services provided. For this to work, the goods usually need to be in your physical possession, and the work must relate to those specific goods. Your contract should specify lien rights rather than assuming they exist.
PPSR security interests protect suppliers of goods sold on credit or with retention of title. If you supply goods and retain ownership until payment is made, you can register this interest on the Personal Property Securities Register. Registration gives you priority over other creditors if the client becomes insolvent—meaning you're more likely to recover your goods or get paid from their proceeds. PPSR rights must be clearly outlined in your supply contract and registered properly, ideally before goods are delivered.
These rights are valuable, but only if your contract establishes them and you've followed the right procedures. If your current contracts are silent on retention, liens, or PPSR, that's something to address for future work.
The first step is clear, documented communication. Send a professional reminder that creates a record of your attempt to resolve this directly. Your reminder should reference the specific invoice number and original due date, attach a copy of the invoice, and ask for confirmation that it was received and when payment will be made.
Keep your tone professional and factual. This isn't about assuming bad faith—sometimes invoices get lost, circumstances change, or genuine misunderstandings occur. Your goal is to create a clear record while keeping the relationship as intact as possible.
If you don't get a response or the client acknowledges the invoice but doesn't pay, send a firmer follow-up. Reference your payment terms from the contract, remind them of any late fees or interest that may apply, and outline what happens next. Be specific about timeline—for example, "If payment isn't received within seven days, we'll pause further work and refer this matter to our debt recovery process."
Document every communication. Save emails, note phone conversations with dates and details, and keep copies of all invoices and reminders. If you eventually need legal action or debt recovery services, this documentation becomes essential evidence of your reasonable attempts to resolve the issue directly.
If professional reminders haven't worked and the amount is significant enough to warrant further action, you have several options depending on your circumstances and the relationship involved.
Formal letter of demand: A lawyer can send a formal letter outlining the debt, your legal rights, and the consequences if payment isn't received by a specific date. This often prompts payment because it signals you're serious about recovery and have legal support. The letter references your contract, confirms the amount owed, and typically gives a final opportunity to pay before you take further action.
Debt recovery agency: Commercial debt recovery agencies specialise in pursuing unpaid invoices. They work on commission or flat fees and handle communication and follow-up on your behalf. This can be effective for straightforward debts where the client has capacity to pay but needs external pressure. Agencies understand collection strategies and can often recover payment without court action.
Legal proceedings: For larger amounts or when other approaches fail, commencing legal action might be necessary. Small claims processes exist for debts under certain thresholds (check current NSW limits), offering a more accessible route than full court proceedings. For larger amounts, you might issue a Statement of Claim in an appropriate court. Legal action has costs and takes time, so it's worth discussing with a lawyer whether the likely recovery justifies the expense and effort.
Before threatening legal action, get professional advice. A lawyer can assess whether your position is strong enough to justify proceedings, estimate likely costs and timeframes, and help you understand realistic recovery prospects. Sometimes the threat of action is enough. Other times, actually commencing proceedings is necessary to demonstrate you're serious.
Consider a business that provides consulting services with deliverables at the end. They've had payment problems in the past—clients receiving the final report and then becoming hard to reach when invoices are due.
They restructured their approach by breaking projects into three phases with separate invoices: initial consultation and scope (30%), development and interim review (40%), final report and handover (30%). Each phase had to be paid before the next phase commenced. The final report wasn't delivered until the last invoice was paid.
Their contract specified that deliverables at each phase remained their intellectual property until payment for that phase was received. They also included a clear provision about late fees—2% per month on overdue amounts—and the right to suspend work if invoices remained unpaid for more than 14 days.
This structure didn't eliminate all payment issues, but it significantly reduced both the frequency and the amount at risk. When payment problems occurred, they were identified early (after the first 30% rather than after 100% of work was complete), and the business had clear contractual grounds to pause work until payment came through. The arrangement worked because expectations were documented clearly from the start.
Immediate Actions for Unpaid Invoices
Red Flags Requiring Immediate Attention
Prevention for Future Work
When payment issues arise, having both clear contract protections and a methodical approach to follow-up makes all the difference. Let's work together to ensure your contracts actually support getting paid, and to handle current payment issues effectively.
Getting paid reliably starts with contracts that include the right protections and give you clear options when issues arise.
Whether you're dealing with a current non-payment situation or want to prevent problems in future work, I can help you put proper terms in place and understand your rights when clients don't pay. That includes reviewing your current contracts, helping you structure payment terms that actually work, and guiding you through recovery options when necessary.
Ready to discuss your payment terms and protection strategy? Contact Jackie Atchison at LexAlia Property & Commercial Law to explore how your business can be better protected.
Would you like to discuss your business contract protections?
Start by checking your contract to understand what payment terms were agreed and what rights you have. Then send a professional written reminder referencing the specific invoice, due date, and your payment terms. Keep records of all communication. If that doesn't work, send a firmer follow-up outlining next steps. Most payment issues resolve with clear, documented communication before escalation is necessary.
If your contract includes a suspension clause—stating that work can be paused if invoices remain unpaid—then yes, you can stop work. Without this provision in your contract, suspending work might put you in breach of contract yourself. This is why payment terms that specifically address suspension rights are so valuable. Let's discuss whether your current contracts give you this protection.
It depends on your contract. If your terms state that deliverables won't be transferred until payment is received, you have a clear right to withhold them. If your contract is silent on this, the situation becomes less clear—you might be obligated to deliver even if payment hasn't been made. The best approach is having this documented in your terms from the start.
The PPSR is a national register where you can record security interests in personal property (including goods you've supplied on credit). If you supply goods and retain ownership until payment, registering on the PPSR gives you priority over other creditors if your client becomes insolvent. Without registration, you might lose your goods to other creditors even though technically you still own them. PPSR protection requires clear contract terms and proper registration before or shortly after delivery.
For most business debts, trying a debt recovery agency first makes sense. They're experienced in collection strategies and often recover payment without court involvement. Legal action is more expensive and time-consuming, so it's usually reserved for larger debts, situations where recovery agencies haven't worked, or when you need a court judgment for enforcement. A lawyer can help you assess which approach suits your situation and likely recovery prospects.
Don't wait too long—older debts become progressively harder to recover. After a professional reminder at 7-14 days overdue goes unanswered, send a firmer follow-up within another week. If you still don't get payment or a reasonable payment plan, consider escalating within 30-45 days of the original due date. Your contract might specify timeframes for late fees or suspension, which gives you clear triggers for escalation.
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