What Can You Do When a Customer Won’t Pay an Invoice?

What goes in a demand letter, and when it goes out

A demand letter is the written version of the last request. It goes out once the reminder schedule has run without payment or a reason, at a point the company sets in advance rather than in the moment. Illustrative example: reminders before and after the due date, a call at 15 days past due, the demand at 30 days, and a decision on the next step at 45. The days are invented; the company’s own terms set them.

Keep it factual and short, and name only a next step the company will actually take. A letter that threatens court and is followed by another polite reminder teaches the customer that the date was not real.

• Who owes, by legal name, and who is owed.
• The invoice numbers, dates and amounts, the total, and any payments already credited.
• The payment terms in the contract, and its late-charge or interest clause if it has one.
• A pay-by date, and exactly how to pay.
• The next step and when it happens: stopping further work, a lien, a court filing or placement with an agency.
• Copies of the invoice and the signed contract or work order.

Send it by a method that proves delivery, and by the method the contract’s notice clause names, if it names one. Some rules make the letter a formal step. In New York City, a commercial claim arising out of a consumer transaction can be filed only after a demand letter was mailed by ordinary first-class mail no less than ten and no more than 180 days earlier, stating the date of the transaction, the amount unpaid and the intent to go to court, with a copy of the underlying document and an accounting of payments (Civil Court Act §1803-A(b)). A California small claims plaintiff states that it has demanded payment “where possible” (Code of Civil Procedure §116.320(b)(3)). When the customer is a household rather than a business, read the collection rules in the agency section below before the letter goes out.

When to stop work or end the relationship, and the notice that comes first

The right to stop work comes from the signed agreement, not from the overdue invoice. Look for a suspension clause, the days of notice it requires and how notice must be delivered, and a termination clause with what it says the company is paid on termination. Where the agreement has those, the order is: written notice that cites the clause and the unpaid invoices, names the date work will stop and says what restarts it; then stop on that date, not before. Where it has none, stopping a job in progress can be argued to be the company’s own breach, and that is a question for the attorney before anyone pulls a crew.

Not starting new work is a simpler decision. Declining the next job or load that is not already under contract until the account is current, or asking for payment up front on it, is a credit decision the owner can make; write it down so the office and the field apply it the same way. A later phase or a standing order the company has already agreed to is work under contract, and the paragraph above applies to it. Public owners, law firms and health-care or home-care providers work under rules of their own about payment notices, withdrawal or ending services; those go to counsel first.

Ending the relationship can be done without a fight. Where a service agreement still has a term to run, the ending follows its termination clause and notice period. A short, dated letter, sent after the demand date has passed, states the last day of service, the balance and how to pay it, and what happens to the customer’s materials, keys or records. It does not argue the dispute or apologize for the invoice.

The architecture and engineering version of this question, with the standard-form suspension clause and a public client’s payment clock, has its own guide, linked at the end.

When a collection agency is worth it, and what contingency pricing does to the decision

A collection agency is worth it when the debt is undisputed, the customer has stopped responding after a written demand, the amount is too small to justify an attorney, and the relationship is over. It is a poor fit for a real dispute about the work: an agency collects, it does not settle scope arguments. Treat placement as the end of the relationship, not a stage of it.

An agency is paid a flat fee per account or a contingency share of what it collects, and the agreement says which. Contingency means the agency is paid only when money comes in, which moves the risk and changes the arithmetic. Illustrative example: a $20,000 balance placed at a contingency rate of 30 percent, a rate chosen for the arithmetic and not a quote, returns $14,000 if it is collected in full and nothing if it is not. The same $20,000 filed in a Texas justice court keeps the full amount if it is collected, less filing costs and the owner’s time, but the court does not collect it. The decision is which net figure, at which odds, beats the others, including writing the balance off, each set against the cost of carrying the balance while nobody collects it.

What to check before placing an account, from the agency’s registration to the agreement’s terms on settlements, direct payments and recall, and the consumer collection rules that apply when the customer is a household, is in the guide to choosing an AR consultant or a collections agency.

If the customer files for bankruptcy, stop collecting and call the attorney the same day: in the federal courts’ own explanation, the automatic stay suspends “all judgments, collection activities, foreclosures, and repossessions of property” on debts that arose before the filing.

Can you take an unpaid invoice to small claims court? The limits in four states

Yes, if the amount fits under the state’s limit and a business is allowed to file there. The limits are set by court rule or statute and they change, so check the current figure before filing. As they read on October 22, 2026:

• Florida: the small claims rules apply to claims for money or property of not more than $8,000, exclusive of costs, interest and attorneys’ fees (Small Claims Rule 7.010(b)). A business may appear through a principal with authority to bind it, or an employee authorized in writing by a principal (Rule 7.050(a)(2)).
• Texas: justice courts hear civil matters in which the amount in controversy is not more than $20,000, exclusive of interest (Government Code §27.031(a)(1)).
• California: the courts’ self-help guide puts the general limit at $12,500, or $6,250 if the plaintiff is a business, and says a party cannot have a lawyer represent it. No one may file more than two small claims actions over $2,500 anywhere in the state in a calendar year (Code of Civil Procedure §116.231(a)).
• New York City: the small claims part takes claims up to $10,000, exclusive of interest and costs (Civil Court Act §1801), but a corporation, partnership or association may not sue there (§1809). A corporation, partnership or association with its principal office in New York uses the commercial claims part instead, up to the same maximum (§1801-A), with the demand-letter rule above when the claim arises out of a consumer transaction.

Winning is not the same as being paid. California’s guide says it plainly: “The court does not do it for you.” A judgment is a document the company then has to collect, and a customer with no money pays no faster because it lost in court. Small claims fits a clear, documented claim against a customer that is still operating and able to pay. A balance over the limit goes to the regular civil courts, which is the point to bring in an attorney.

What a contractor can do that other businesses cannot: liens and their deadlines

A business whose work improves real property, such as a roofer, an HVAC, plumbing or electrical contractor, or a remodeler, may have a lien right: security for unpaid work that attaches to the property itself. It is the strongest tool on this page and the most perishable, because every step runs on a statutory clock that starts from the work, not from the invoice. Whether a trade’s work counts, and which notices each party on the job must give, are set by each state’s statute and read by the company’s construction attorney. Three examples, as the statutes read on October 22, 2026:

• Florida, chapter 713. A subcontractor, sub-subcontractor or supplier not in privity with the owner must serve a notice to owner before, or not later than 45 days after, it starts furnishing labor, services or materials (§713.06(2)(a)). A claim of lien must be recorded no later than 90 days after the final furnishing (§713.08(5)) and served on the owner before recording or within 15 days after (§713.08(4)(c)). A contractor must deliver its final payment affidavit at least 5 days before suing to enforce its lien (§713.06(3)(d)). The lien lasts no longer than 1 year after the claim of lien is recorded unless an action to enforce it is started within that year (§713.22(1)).
• Texas, Property Code chapter 53. An original contractor files its lien affidavit by the 15th day of the fourth month after the month its work was completed, terminated or abandoned, or the third month on a residential construction project (§53.052(a)). A subcontractor or supplier sends notice of the unpaid claim to the owner and the original contractor by the 15th day of the third month after the month the labor or materials were provided, or the second month on a residential project (§53.056(a-1)).
• California, Civil Code. A claimant gives preliminary notice within 20 days after first furnishing work, or its lien reaches only work from 20 days before the notice onward (§8204(a)); a contractor with a direct contract with the owner gives it only to the construction lender, if there is one (§8200(e)(2)). A direct contractor records its claim of lien after completing its contract and before the earlier of 90 days after completion of the work of improvement or 60 days after the owner records a notice of completion or cessation (§8412), and sues to enforce it within 90 days after recording (§8460(a)).

A notice of intent to lien is a separate document. In some states it is a statutory step: Wisconsin bars a lien claim unless the claimant served the owner a written notice of intent at least 30 days before filing (Statutes §779.06(2)). Elsewhere it is a final demand some contractors send on their own, and whether the state requires one, and in what form, is the attorney’s call. What does not move is the recording deadline, so a notice of intent sent in the last weeks can cost the lien it was meant to protect. Illustrative example: a Florida HVAC contractor finished a $20,000 commercial install on March 3 and has not been paid. The amount is over Florida’s small claims limit, so the lien is the tool to protect, and its recording deadline under §713.08(5) is June 1. The demand letter goes out in March, not in May. The job, the amount and the dates are invented.

Is there a statute of limitations on unpaid invoices?

Yes. Every state sets a deadline for suing on a contract, and an unpaid invoice is a claim on a contract. The period depends on the state and on whether the agreement was in writing. The general periods, as the statutes read on October 22, 2026:

• Florida: 5 years for an action on a contract founded on a written instrument (§95.11(2)(b)); 4 years for one not founded on a written instrument, including the sale and delivery of goods and store accounts (§95.11(3)(j)).
• Texas: 4 years after the day the cause of action accrues, for a suit on a debt (Civil Practice and Remedies Code §16.004(a)(3)).
• California: 4 years for a contract founded on an instrument in writing and for a book account (Code of Civil Procedure §337); 2 years for one not founded on an instrument of writing (§339).
• New York: 6 years for a contractual obligation or liability, express or implied, with exceptions that include sales of goods under the Uniform Commercial Code (CPLR §213(2)).
• Motor carriers: a carrier must begin a civil action to recover charges within 18 months after the claim accrues (49 U.S.C. §14705(a)). Whether that federal period reaches a freight brokerage’s own claim against a shipper is a question for a transportation attorney.

The statute of limitations is the outer wall, not the plan. When the clock starts, what pauses or restarts it, and which state’s period applies under the contract’s governing-law clause are questions for the attorney. An invoice is easiest to prove while the people who did the work remember it and the records are at hand, so the steps above belong in the first weeks, not the last year. A freight brokerage that already paid the carrier is out the carrier’s pay for the load while the shipper sits on the invoice; the guide to shippers that short-pay covers counting the partial version of the same problem.

When to bring in help, and what kind

If the weekly list holds one or two customers, the next call is to an attorney or an agency, not a consultant, and nothing in this guide is legal advice. If it keeps refilling for the same reasons, such as invoices rejected for paperwork, change orders nobody signed, terms nobody agreed in writing, or demand letters that never went out, the problem sits upstream of collections, in how finished work becomes an invoice the customer accepts.

That is where the Revenue Review looks. It reads the company’s own contracts, invoices, payments and aging, read-only, never contacts a customer, and puts a monthly dollar figure on each leak the records support, in a written report the company keeps. It takes two weeks. The next step is a free 20-minute call, where the honest answer may be that the list above and an hour with an attorney are enough.