Guides / Unpaid invoices
Unpaid invoices: getting paid when a customer will not pay
An unpaid invoice is one of the most common reasons a small business sends a letter of demand. Most are paid without anyone going to court, but the order of steps matters. This guide covers what to do before the letter, what the letter should say, and what comes after.
Before the letter: check your position
Find your terms. Work out what the customer agreed to. That may be a signed contract, a quote accepted by email, a purchase order or your terms of trade. Note the payment terms and any clause about interest or collection costs. Check that the customer saw those terms before agreeing to the work.
Check who your customer is. Your contract may be with a company, a sole trader or a trust. An invoice addressed to a trading name does not tell you who is legally responsible. ABN Lookup and an ASIC company search will show the entity behind the name.
Check the invoice. Confirm the amount, the GST and the due date, and that every payment received has been credited. A demand for the wrong figure gives the customer an easy reason to argue.
The numbers to know
3 a week
For individual consumers, the ACCC and ASIC debt collection guideline recommends no more than three contacts a week or ten a month.
Before the letter: reminders
$100,000
You can file a claim in the Magistrates’ Court of Victoria for debts up to $100,000.
After the letter
$10,000
Claims under $10,000 are usually sent to arbitration, a less formal hearing.
After the letter
$4,000
If your customer is a company, the debt is at least $4,000 and there is no genuine dispute, a statutory demand may be quicker.
After the letter
6 years
Keep them for at least six years. That is the general time limit for suing on a contract debt in Victoria.
Keep good records
$440
Our fee for a letter of demand is fixed at $440 including GST, and we take no commission on what you recover.
Common questions
Before the letter: reminders
Send a polite reminder soon after the due date, with a copy of the invoice. If that does not work, send a statement of account and follow up by phone. Make a note of every call: the date, who you spoke to and what they said.
Keep your contact reasonable. For individual consumers, the ACCC and ASIC debt collection guideline recommends no more than three contacts a week or ten a month. Constant calls and messages can cross into harassment, and they rarely work.
The letter of demand
When reminders have not worked, a letter of demand puts the claim in formal terms. It names the customer correctly, sets out each invoice and payment, gives a firm deadline and says what you will do next. Our guide on how to write a letter of demand has an annotated example for an unpaid business invoice.
A letter on a lawyer’s letterhead tells the customer the matter is now serious. We check your terms and documents first, so the letter claims only what you are entitled to.
Interest and late fees
You can claim interest on an overdue invoice only where your contract or trading terms include an interest clause, and only at the rate it sets. Adding interest or a late fee to an invoice after the customer agreed to the price does not create a right to it. Without an interest clause, interest is left for the court to decide after you file a claim. See Interest, costs and time limits.
After the letter
- They pay. Confirm receipt in writing and close the file.
- They offer instalments. Agree to a plan only in writing, signed by the customer. If the customer pays part of the debt, or signs something admitting it, the six-year period starts again.
- They dispute the invoice. Look at what they say. Some disputes are real and worth resolving by negotiation. Others are raised only to delay.
- They ignore it. You can file a claim in the Magistrates’ Court of Victoria for debts up to $100,000. Claims under $10,000 are usually sent to arbitration, a less formal hearing. If your customer is a company, the debt is at least $4,000 and there is no genuine dispute, a statutory demand may be quicker. The Victorian Small Business Commission also offers low-cost mediation for some small business disputes. See If they still do not pay.
Keep good records
Every step is easier with good records. Keep:
- the quote, contract or order, and your terms of trade;
- delivery dockets, timesheets, photos and sign-offs;
- invoices, statements and receipts for payments;
- reminders, emails and messages, and notes of calls.
Keep them for at least six years. That is the general time limit for suing on a contract debt in Victoria.
Common questions
Have another question? Phone 1800 776 529 or send us a message.
Once reminders have gone unanswered, usually within a few weeks of the due date. The longer an invoice sits, the harder it tends to be to collect.
Deal with the complaint first. If it has no substance, say so in the letter and explain why. If part of it is fair, consider claiming the amount that is not in dispute.
No. Our fee for a letter of demand is fixed at $440 including GST, and we take no commission on what you recover.
Law referred to
- Australian Competition and Consumer Commission and Australian Securities and Investments Commission, Debt Collection Guideline: For Collectors and Creditors (Regulatory Guide 96, April 2021).
- Limitation of Actions Act 1958 (Vic) ss 5(1)(a), 24(3), 25.
- Magistrates’ Court Act 1989 (Vic) ss 3(1) (definition of “jurisdictional limit”), 100(1), 102.
- Corporations Act 2001 (Cth) ss 9, 459E, 459H.
- Corporations Regulations 2001 (Cth) reg 5.4.01AAA.
Last reviewed: October 2026, by a Victorian solicitor with a current practising certificate. This page is general information about the law in Victoria as at October 2026. It is not legal advice about your circumstances.
Invoice still unpaid?
Send us the details and we will send a letter of demand on our letterhead within two business days, for a fixed fee of $440 including GST.
Phone: 1800 776 529
Email: info@lettersofdemand.com.au
Hours: Monday to Friday, 9 am to 5:30 pm
Office: 435 Nepean Highway, Frankston VIC 3199. We act across Victoria by phone, email and online.
Letters of Demand is a service of Professional Edge Lawyers.