Ignition blog  /  Improve cash flow  /  How to handle unpaid invoices (and avoid them!)

Dealing with unpaid invoices can be stressful, we explore the steps you can take to get paid.

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When you’re running a business, few things are as stressful as chasing payment for unpaid invoices. In addition to being an uncomfortable and awkward situation overall, overdue client bills can put a strain on your cash flow and hurt your ability to invest in your business.

Unfortunately, late payments are quite common in the realm of accounting and bookkeeping services. Research carried out by Ignition found that in the United Kingdom, 90 percent of accountants and bookkeepers experience the awkward client situation of chasing for late payments.

In the United States, 94 percent of accountants and bookkeepers said they need to chase clients for late payments, and in Australia 95 percent experience awkward situations of chasing clients’ late payments and clients not being billed for out-of-scope work.

That being said, just because something is ‘common’, it doesn’t mean you can’t do anything about it. This is how you can take action ASAP.

How to collect an unpaid invoice

Below we outline the steps you can take to handle unpaid invoices. You’ll learn what processes to establish, what to say to your clients, and what to do if someone refuses to pay.

Step 1. Send a friendly reminder

If a client hasn’t paid their invoice, send them a reminder a day or two after the bill is past due. A missed payment at this stage could mean the invoice has slipped through the cracks or the client has simply forgotten about it.

Keep things friendly by sending a reminder along the lines of…


Just sending a gentle reminder that the invoice for August is now due. Here is the link to the invoice and I’m also attaching a PDF copy in this email.

I appreciate your business and look forward to collaborating with you further!



Step 2. Consider other communication channels

In line with a polite email reminder, it may also help to reach out to the client via other methods. A quick phone call or even a visit to their offices (if the client is local) can help ensure the matter is dealt with quickly.

Phone calls and in-person meetings are harder to ignore. Plus, you can get an immediate response, as opposed to waiting hours or days for a reply.

Step 3. Consider charging interest

The thought of having to fork out interest or penalties could be just the thing that motivates a client to pay. But first check legal guidelines to see if it’s permissible and if it is, the rate of interest you can charge. These factors could differ depending on where you’re located. For example, in the US, there are limits on the amount of interest you can charge depending on your state. It’s also important to include these details in your letter of engagement.

In the UK, gov.uk provides late payments guidelines. While in Australia, it’s recommended that you first check your terms and conditions before determining a fair interest rate.

Managing unpaid invoices is a delicate process. Discuss it with your client ahead of time, so they are aware of the expectations and don’t feel blindsided by interest on an overdue invoice. Excessive penalties could leave them feeling punished and result in a negative experience and unnecessary strain on your client relationship. You could allow your clients to request a payment extension if they need the extra time to pay. This provides a degree of flexibility that supports both your client and your business.

Step 4. Send an overdue invoice reminder

If the client still doesn’t pay after your initial reminders, take things a step further by sending an overdue invoice reminder.

Subject: Late payment: Did you miss the invoice?


I’m following-up on unpaid invoices and noticed that you’ve yet to make payment on [invoice numbers]INV-0023, which was sent to you on [date]DATE.

Since I haven’t received payment, I wanted to check in and make sure the invoice hadn’t gotten lost? I know that they can sometimes be sent to ‘Spam’ folders, or perhaps your accounts team is really busy right now, so I’ve gone ahead and attached it here again for your convenience.

However, given that this invoice is now 15 days overdue, you’ll need to make payment within the next [number of days] days if you wish to avoid the overdue payment fee of X% added to the bill.

If payment has already been made please disregard this email.

Yours sincerely,


Send a statement of account

If your client has multiple unpaid invoices, include a statement of account (or account statement) outlining all transactions between you and the client over a given time period. It summarizes the amount paid and amount owed, making it easy for the client to see how much they need to pay.

Step 5. Explore repayment options with the client

If the client responds to your overdue invoice reminder, but doesn’t have the means to immediately pay you in full, you can structure repayment options to help them settle the invoice. Depending on the situation, this could mean spreading the payments over a certain amount of time (for example, six, 12 or 18 months).

You could also ask the client how much they’re able to pay right now, so you can collect that amount and settle the rest through installments.

Step 6. Formal letter of demand

If the client misses the payment date the next step is to send a final notice (you could use this basic email template) or a formal letter of demand (as below) to instill a sense of urgency and explain all the issues.

Where your business operates will dictate the type of correspondence you should send. For example, if you are operating in Australia, you can refer to business.gov.au for a letter of demand template. In the US and UK, Law Depot provides templates you can use in these situations. In all instances, it pays to do your due diligence and ensure you are complying with all local laws and regulations.

Here’s an example of an email that you could send:

Dear [NAME] –

Our records show that payment for the attached invoice for [insert amount] is overdue. We have attempted to contact [name(s) of the business owner] on [dates] by [method of communication] to organize payment, which is now [days or months] overdue.

Please pay the invoice amount within [number of days]. If we do not hear from you or receive any payment within [number of days permissible under law] days, your account will be sent to a collections agency to pursue immediate payment.

Thank you for your urgent attention in regards to this matter.



To add to the sense of urgency, you can send the letter via certified mail (when doing business in the US); registered post (in Australia) and/or recorded delivery (in the UK), so you can verify the letter and invoice was received.

Step 7. Notify the client that you’ll be filing a complaint (and actually do it)

Do you have a client who you can’t get hold of or who’s disputing payment? There are organizations you can turn to for help (such as the Better Business Bureau or BBB in North America; Australian Securities & Investments Commission or ASIC in Australia; or through mediation, statutory demand or a court order in the UK). Escalating the dispute in a way that brings in an official or legal representative, could be the prompt your client needs to encourage them to pay.

This process will vary depending on where you’re filing your complaint or who you’re appealing to for help. For instance, if you’re doing it through the BBB in the US, the following steps will be taken:

  • If your complaint meets the BBB’s criteria, it will be sent to the other business (for example, the client) within two business days.

  • The other business will be given 14 days to respond.

  • You will be notified if and when the other business responds to the complaint.

Step 8. Hire a collections agency

If your efforts up until this point haven’t netted any results, it may be time to hire a debt collector to do the heavy lifting for you. Debt collectors are trained to chase late payments, however it’s worth bearing in mind that in some cases, collections agencies charge a percentage of the debt collected. For more information on this, other debt collection services and the processes to follow, check collection agency services guidelines in the US, government websites in Australia or enlist the services of a law firm in the UK.

Involving courts and lawyers can take time and money, so this step is usually a last resort. However, if you’re owed a sizable amount, then legal action may be worth the effort.

The right course of (legal) action depends on your industry and location, so be sure to consult an attorney or solicitor who specializes in your line of work, and have them guide you through the process.

Another option is to take the client to small claims court or make a court claim for money, so you can settle the dispute with or without the involvement of lawyers.

How to prevent unpaid invoices

If you made it this far, then you know that dealing with outstanding invoices can be stressful and time-consuming. That’s why you need to implement steps and systems to prevent these situations from happening altogether.

Here are some suggestions on how to do just that:

1. Collect payment upfront

If possible, charge clients either a deposit that covers your costs or the full amount before you start working on their project. This ensures that you get paid (at least partially) for your work.

Depending on how your business is run, you can also consider using a subscription or recurring payments model for part or all of your project work. This allows you to automate payments for a predictable amount at regular intervals.

2. Support multiple payment methods

Eliminate any friction from the payment process by allowing your clients to pay using their preferred methods. In our increasingly digital world, this often means accepting credit or debit card payments and automated clearing house (ACH) transactions.

Aside from being more convenient methods for clients, card payments and ACH are also beneficial for service providers such as accountants and bookkeepers. Funds are sent faster (no more waiting for invoices to be paid manually or checks to come in the mail) and the money is automatically deposited in your bank account, which reduces admin work.

3. Use billing and invoicing software

Software such as Ignition makes client payments easier by automating tasks like sending invoices and reminders. That way, clients are prompted to pay with little effort (and stress) on your part.

The platform’s billing capabilities can support various business processes. So, whether you're billing clients by the hour, sending monthly invoices, or implementing billing on completion – Ignition has got you covered.

Over to you

Chasing late payment for unpaid invoices can cause cash flow issues for your firm and take time away from your business. Fortunately, there are steps you can take to tackle it – and even prevent it. With the right tools, you can implement billing practices and keep those outstanding invoices at bay.

Want to find out more? Learn how Ignition can help you stay on top of billing and invoicing. Watch our online demo.

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Meet the author

Francesca Nicasio
Francesca Nicasio

Contributing Author 

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Published 31 Aug 2022 Last updated 19 Mar 2024