The invoice was due six weeks ago. You have sent three reminders. The last one got read and ignored.
Most business owners reach for a letter of demand at about this point, and usually that instinct is right. A well-drafted demand resolves a large share of unpaid invoices without anyone going near a court. But the letter is the visible part of the job. What decides whether you actually get paid is the work you do before you send it.
This sounds obvious. It is also the single most common thing businesses get wrong.
The name on your invoice might be a trading name, not a legal entity. It might be a trustee. It might be a company that was deregistered last year. Check the full legal name and the ACN or ABN, and confirm the current registered address. If there is a guarantor, a trustee or a related entity in the mix, work out who is actually liable before you write to anyone.
Chasing the wrong entity wastes months. Worse, it can give the debtor a reason to ignore you and look reasonable doing it.
A debtor who does not want to pay will rarely say “I do not want to pay”. They will say the work was late, incomplete, or defective.
So before you escalate, pull the file together. The executed contract and any terms it incorporates. Purchase orders, quotes, variations. Delivery records, sign-offs, milestone approvals. Invoices that are correctly addressed and match the agreed pricing.
Then reconcile the account properly, showing invoices, payments, credits and the balance you are actually claiming. If your ledger does not tie back to your bank records, fix that first. A demand for the wrong number is worse than no demand at all.
Different claims, securities and procedures carry different time limits. Delay can affect your rights, and it always affects your evidence.
Work out the earliest possible deadline and how it was calculated. Watch for contractual notice periods, security expiry dates, and procedural cut-offs. And do not assume that a negotiation, a payment plan discussion or a contractual dispute process pauses anything. Usually it does not.
Here is the uncomfortable question. A judgment is a piece of paper. It does not produce money.
Before you spend on recovery, consider whether the debtor is still trading, whether it owns assets, and whether it is already facing insolvency action. Company and insolvency searches are cheap. Legal costs are not. If there is no practical prospect of enforcement, that changes the strategy entirely, and it is better to know now.
A demand works when it is accurate, specific and proportionate. It should identify the debt and the legal basis for it, refer to the supporting documents, state how payment can be made, give a reasonable response deadline, and set out the intended next step.
It should not be exaggerated. It should not threaten anything you are not prepared or entitled to do. Keep proof of delivery.
Overstating a claim can undermine your position later, in front of exactly the person you need to persuade.
Fifteen steps, from overdue invoice to enforcement. Covers verifying the debtor, proving performance, reconciling the claim, reviewing security and guarantees, assessing solvency, drafting the demand, and planning enforcement before you obtain judgment. Includes a one-page tracker.
Work through the checklist first. If the debt is significant, the debtor is disputing it, or a deadline is close, call us on (02) 8201 0051. Leo Lawyers acts for businesses on debt recovery and commercial disputes in New South Wales and Victoria.
This resource is general in nature and is not legal advice. Debt recovery rights, procedures, limitation periods and enforcement options depend on the facts, documents, forum, circumstances and applicable law.
This is where businesses get into real trouble.
A statutory demand is an insolvency procedure for a debt that is due and payable by an Australian company. It carries a strict prescribed form and a short, unforgiving response period. It is not a substitute for deciding a genuinely disputed claim.
Serve one where a real dispute or offsetting claim exists, and the debtor may apply to set it aside. You can end up paying their costs and losing your leverage in a single step. Get advice before serving one, and get advice quickly if you have received one.
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Court, tribunal, adjudication, arbitration and contractual processes all have different jurisdictional and procedural rules. The right one depends on the parties, the subject matter, the amount and what your contract says.
Sometimes the commercially better answer is a payment plan with security attached. That is not a failure. Recovering 80 percent next month often beats recovering 100 percent in two years, minus costs.
Fifteen steps, from overdue invoice to enforcement. Covers verifying the debtor, proving performance, reconciling the claim, reviewing security and guarantees, assessing solvency, drafting the demand, and planning enforcement before you obtain judgment. Includes a one-page tracker.
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