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How to Deal With Unpaid Invoices From Clients & Avoid Future Problems


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In an ideal freelance world, you’d get paid in full and on time for each invoice you send out. Unfortunately, that’s not always the case. Most of us will come across a past-due or nonpaying client at one point or another during our freelance careers.

Learn how to handle payment issues when they arise by understanding what causes them, knowing your options for how to collect them, and developing strategies for preventing them from happening in the future.

What Causes Unpaid Invoices

Late payments and unpaid invoices understandably cause you a lot of stress. After all, you rely on consistent and predictable cash flow to pay your bills and plan out your finances.

When a client misses a payment, it’s not necessarily intentional or malicious. It could be for a variety of reasons. For example, your client may have missed making a payment due to one or more of these reasons:

1. New, Poor, or Complicated Accounting Processes

Unorganized, new, or overly complicated accounting processes contribute to many late payments. Changes in software, staff, financial institutions, or even email addresses can lead to even the best clients missing a payment or losing track of an invoice.

Typically, paying an invoice requires multiple steps on the client’s end:

  • Receipt of the invoice
  • Approval or confirmation of the services and charges
  • Determining the appropriate expense category
  • Making a payment

This means your invoice may change hands many times before it’s actually paid, leaving room for human error.

Although you can’t do much to influence the accounting process your client uses, you can do your best to make things more efficient from your end.

Work with your client to determine which types of invoices and billing cycles work best for them, and ensure your contacts are up-to-date and relevant. Sometimes, simply changing who you send invoices to increases your chances of getting paid on time.

2. Staffing Issues

If the person you typically send invoices to takes time off or leaves your client’s company, it may cause temporary payment problems. The staff member filling in or taking over the role may need time to adjust to the previous staff member’s processes and responsibilities.

These types of situations aren’t anyone’s fault, so it’s important to be patient and understanding. How you handle these types of circumstances will demonstrate your professionalism as a freelancer, solidifying your relationship with a client.

3. Cash Flow Problems

As a freelancer, you know that cash flow can be a real problem. Sometimes, clients may have the best intentions to pay you in full and on time but are simply unable to do so because they need extra time.

Extending a payment due date is inconvenient for you — and it may even affect your own cash flow — but there’s not much you can do outside of waiting a little longer.

When this happens, be sure to have a conversation with the client about when you can anticipate a payment and get an actual date.

If you’re struggling to make ends meet because you were relying on them to pay your invoice, ask for a partial payment in the meantime or propose a payment plan. Although not ideal, it will put some cash in your pocket in the interim.

4. Unclear Payment Terms

When working with a client, the person who wrote out your freelance contract and the person who facilitates your payments aren’t always the same. This means whoever is in charge of sending out your checks may not be fully aware of the payment terms in your contract, such as your billing cycle, preferred payment method, or due dates.

If you don’t include this information on your invoices, there’s a chance whoever receives them may not be aware of your payment expectations. To avoid this situation, be sure to include the following information in each of your invoices:

  • The payment due date
  • The total amount due
  • Your preferred payment method
  • The date the invoice was sent
  • Whether late fees will be applied after a certain date

This clarifies your payment expectations and makes it easier for whoever is in charge of paying you to know when and how to compensate you for your services.

On the other hand, you may be the one who misunderstood the payment terms in your contract. Before you send a follow-up, review the terms you agreed to — especially if they were dictated by the client. It could be that you mixed up a billing cycle or overlooked a clause about payment methods.

5. Dissatisfaction

Unfortunately, not all missed payments are due to errors or oversights. Sometimes, dissatisfied clients will refuse to make a payment because they weren’t happy with your work, regardless of the payment terms stipulated in your freelance contract.

Clients who unexpectedly withhold payment or pay you less than you expected because they’re unhappy with your work cause you a lot of financial grief.

To avoid this, keep open communication with your clients throughout the creative process and be clear about changes and revisions upfront. Ensure your freelance contract includes information about:

  • How you agree to handle partially completed work
  • What happens when a project is canceled
  • The scope of the project

It also helps to require a deposit from new clients. If the client later refuses to pay, a nonrefundable deposit ensures that you aren’t left without any income from the work you did.

6. Poor Ethics

The worst clients are the ones who never intend to pay you at all. The best way to avoid nonpayment from unethical clients is to filter them out before signing a contract.

For example, you can:

  • Require nonrefundable deposits on your freelance quotes
  • Choose to only work with reputable small-business owners
  • Take clients by referral only
  • Use your consultation, quoting, and contract process to weed out bad clients

Before agreeing to work with a client, ask lots of questions, clearly define your terms, and set yourself up for success by using deposits, quotes, and contracts to set a professional precedent for your client relationship.

If a client refuses to pay a deposit or sign a contract, take it as a red flag and use your energy to find a better project instead.


Before Pursuing Payment

Because not all nonpayments are intentional or malicious, it’s best to check a few possibilities off your list before you contact a client. Don’t pursue a missing or late payment until you:

1. Make Sure You Didn’t Miss It

You’re just as capable of missing or forgetting about a payment as your client. Before you jump to conclusions, ensure the payment hasn’t already been made.

Review your usual payment method, check your bank account, and ensure that no other payment method was used. For example, maybe there’s a check waiting in the mailbox, even though you usually receive a direct deposit.

It’s also useful to look for any payment processing bugs or errors. For example, some payment providers send an email notification when a payment is made. But just because you didn’t receive an email doesn’t mean the money hasn’t been sent. A glitch or technical issue may be the culprit, not the client.

2. Recheck Your Invoice

Take a look at the invoice you sent to your client and the method you used to deliver it. Is all of the information clear and correct? Did you remember to attach the PDF to your email?

Use reliable methods to send your invoices, such as invoicing software, shared drives, and email. Avoid sending invoices in ways that are not trackable or easy to follow like via post or phone call.

If your invoice wasn’t sent or if it was incorrect, resend it with an apology.

3. Review Your Client Correspondence

Check emails, texts, and chats to see whether you missed an important message about a delayed payment or accounting error. The client could have contacted you already to let you know there was a problem, in which case an email from you asking for an explanation won’t be appreciated.

4. Look Over Your Payment Terms

Payment terms are typically outlined in contracts, quotes, and invoices. If you’re working with a new client, or a different staff member is handling your invoices, it may take some time for the process to run smoothly.

Review the payment terms in your contract — especially if it was provided by the client — to see what you signed on for.

Pay special attention to clauses that mention billing cycles, payment methods, due dates, and first payments.


How to Pursue a Nonpayment

Once you’ve triple-checked that the late payment isn’t already explained or due to an obvious mistake or oversight on your part, it’s time to move forward with collecting it. From basic emails to small claims court, here are some of the options you have at your disposal.

1. Contact the Client

The first thing you should do after you notice an overdue invoice is to contact the client. Begin by using the method of communication you typically contact them through. For example, if you usually have conversations through email, send a follow-up email, or if you usually communicate through phone calls, give them a ring.

Get in touch during regular business hours and give them 24 hours to respond. If they don’t get back to you, try using any other contact information you have, like calling their cellphone or office number.

Take this as an opportunity to send a friendly reminder. Don’t be aggressive or rude. At this point, there’s still a chance that the unpaid invoice is a result of a clerical error or honest mistake.

2. Reach Out to Someone Else

If your usual contact doesn’t respond to you, try contacting someone else at the company like your contact’s colleague, manager, or someone from the accounting department. Let them know that you were unable to contact the person you normally work with and ask them who you should talk to about your invoice instead.

Again, think of this as an exploratory message, not an accusatory one. Your goal is to understand why you haven’t received payment yet and to find a solution that suits both you and your client.

If you used a third-party website to find your client, consider reaching out to the platform to make them aware of the issue. They may be able to offer resources or support a resolution through their website.

3. Work With the Client

If you do happen to get in touch with the client and they’re unable to pay in full or on time, do your best to find a compromise. This could mean outlining a payment plan or extending the payment deadline by a couple of weeks.

A lot of unexpected issues can come up when running a business, from cash flow problems to staffing and accounting issues.

If you’re willing to work with a client to reach a resolution, it will make your working relationship stronger and allow you to find a way to move forward that’s in both of your best interests.

4. Resend Your Invoice

If you can’t get in touch with the client, resend your invoice. Although it may not get you paid, it will help to demonstrate that you made an effort to inform the client of the past due amount if you need to pursue legal action down the road.

This time, though, send multiple copies through multiple methods and to multiple contacts. For example, email a copy to your regular contact as well as their manager and whoever is in charge of accounting, and send a mailed copy to the business address as well.

Include your contact information, such as your phone number and email address as well, so that whoever receives your invoice can get in touch with questions or concerns.

Keep track of when and how you send these documents to maintain a clear paper trail that you can use as evidence if you ever need to.

5. Contact a Mediator or Arbitrator

Mediators and arbitrators are typically used in situations where you cannot reach an agreement with your client. For example, if a client isn’t paying because they aren’t happy with your work, even though your contract clearly states payment in full is due as long as the deliverables are received, it may be time to bring in a third-party facilitator.

If you have a dialogue with a client regarding an unpaid invoice, but it’s not going anywhere, arbitration or mediation will facilitate a resolution between you.

Often, this means settling on the amount due.

6. Send a Demand Letter

A demand letter is a document you can use to request payment from a client. Although it’s not legally binding, it is typically the precursor to legal action. You can either create one yourself or have your lawyer send one for you.

Sometimes, sending an official demand letter from your lawyer can be enough to motivate your client to pay your outstanding invoice or, at the very least, agree on a settlement.

7. Use a Collection Agency

Once a debt is 60+ days past due, you can hire a debt collector or debt collection agency to collect on it for you. Most legitimate collection agencies will require accurate and clear freelance records demonstrating the debt so they can confirm that it’s real and that they have the right contact information for the debtor.

For example, you will likely need to provide a collection agency with:

  • The original signed contract
  • The quote you provided
  • Proof you completed the work (copies of deliverables, or emails or messages confirming your work was received)
  • Copies of any unpaid invoices
  • Copies of emails, texts, direct messages, or mail between you and the client

It should also be noted that a collections agency can’t access bank accounts or garnish wages unless the debtor has been taken to court and received a judgment saying that the debt must be paid.

This means even if you send a collection agency after a client, there’s a possibility that you still won’t receive payment for your unpaid invoice.

Collection agencies will also cost you money to hire, so you need to determine whether the debt you want to collect is worth it. Small outstanding invoices are likely not worth pursuing, and even larger amounts are only worth collecting if you believe there’s a chance you’ll actually get paid.

The statute of limitations for debt collection varies in each state, so make sure to choose a reputable debt collector that only pursues qualifying debts through legal means.

8. Go to Small Claims Court

To get a judgment on a client who has left you with an unpaid invoice, start by pursuing the debt in small claims court. However, the amount due must fit within your state’s small claims court limits, which is typically between $2,500 to $15,000.

When you take a client to small claims court for an unpaid invoice, some states will allow you to hire an attorney to represent you while others will allow you to represent yourself. You will also need to cover your upfront court costs, such as filing and serving fees.

If the court rules in your favor, your client will have a formal judgment against them regarding the debt they owe to you. They may even be required to cover your court expenses. But, if the court rules in their favor, you’ll be out of pocket for not only the debt but any money you spent pursuing it.

9. Go to Court

If the amount of the past due invoice is over the limit for small claims court, you can file a formal lawsuit and pursue it through a traditional court. This is typically more expensive than small claims court since you’ll likely have to hire an attorney to represent you.

As with small claims court, your client may have to cover your expenses if the court rules in your favor. However, if it doesn’t, you will not recoup your costs.


How to Avoid Payment Problems

The best way to deal with unpaid invoices is to avoid them in the first place. Although there’s no way to guarantee you’ll never have to deal with nonpayment again, there are a number of tactics you can use to reduce your chances of coming across them in the future.

1. Choose Quality Clients

Quality clients make a world of difference when it comes to getting paid on time and in full. Use your initial consultation, quote, and contract to get a feel for how committed and legitimate the client is. Look for potential clients who:

  • Have a track record of working with freelancers
  • Are established businesses
  • Have good reputations online or a referral from your network
  • Know what they need from you
  • Don’t make you a lowball offer
  • Have their own legal and accounting processes in place

That’s not to say you should never work with startups or new small-business owners. It just means that these clients come with a greater risk.

Communicating about your invoicing and payment requirements upfront is key. If you and a client are on the same page from the beginning, you have a better chance at building a strong working relationship.

2. Invoice Consistently

Unpredictable invoicing practices and billing cycles make it harder for your clients to pay you on time. Choose a standard billing cycle and send your invoices on a recurring and consistent basis.

For example, many freelancers bill monthly, sending an invoice at the end of each month. This enables long-term clients to expect and plan for your invoices.

It’s also important to speak to your client about who and how to send your invoices. For example, do you send them to your main contact at the company or to the accounting department? Should you upload them to a shared drive or email them as a PDF?

Optimizing invoicing from your end is a great way to facilitate more timely payments.

3. Require a Deposit

Deposits are relatively common in the freelancing world. Often, freelancers require new clients to put one down before starting a new contract. This ensures the contractor isn’t left without compensation for any work they did if the relationship doesn’t work out.

Making a deposit also demonstrates a client’s ability to pay and sets up future billing details, which makes sending and receiving payments easier for everyone down the road.

4. Review Your Contracts

If you provide your own contracts using a lawyer or online template, make sure your terms related to payments and invoicing are clear and legal. From late fees and billing cycles to payment methods and due dates, it’s important that your contracts work in your favor while still providing reasonable boundaries to your clients.

If your clients are the ones who typically provide your contracts, review them carefully. Client-provided contracts tend to favor the client, meaning they don’t typically address issues you may face as a freelancer. Before signing a contract, ask to adjust any clauses or terms that don’t work for you.

You can also ask to include more specific terms, like a section about penalties for past-due invoices.

5. Encourage Early Payments

Some freelancers encourage clients to make early payments by offering small discounts and incentives. For example, you could offer a 5% discount on invoices paid within five days of receipt of an invoice. Or you might give $25 off every invoice paid before the due date.

Of course, this only makes sense when the amount of the incentive is small and you believe it’s necessary.

6. Keep Good Records

Quotes, contracts, and invoices are all part of the records you should create and keep for each client. When a client misses a payment or disputes your payment terms, all you need to do is point to the document they signed to show that they were aware of and agreed to them.

Keep track of important emails and texts and reiterate any verbal agreements about payments or billing in writing.

If you ever do need to contact a collection agency or take a client to court, your records strengthen your case.

7. Send Payment Reminders

There are typically three opportune times to send payment reminders:

  • The day before an invoice is due
  • The day an invoice is due
  • A week after an invoice is due

A friendly reminder is often enough to jog a client’s memory, resulting in you getting paid as expected. Remember to send these through email and keep a copy for your records.

Use polite, friendly language and include information about the amount due, how to pay, and when the due date is. Attach a copy of the invoice in question for good measure.

8. Offer Multiple Payment Options

While you may prefer to be paid in one specific way, it may not be the most convenient method for the client. Offer at least two different payment methods to your clients so they can choose the option that works best with their payment process.

For example, you may prefer PayPal but if your client isn’t set up for it, they may have trouble paying you through that method.

Simple adjustments to how you collect payments might make a considerable impact on your bottom line.


Final Word

No one wants to end up working for free. Not getting paid for your billable services is disheartening and leaves you in a financial bind. And chasing after unpaid invoices is time-consuming and stressful.

The best way to avoid the hassle of pursuing a debt is to prevent it from happening in the first place. But even if you do everything right, you may still come across a client who can’t or won’t pay on time.

When this happens, don’t let your emotions rule your actions. Instead, learn the cause of the nonpayment and work toward finding a resolution with the client. If that doesn’t get you results, consider whether the debt is worth taking to court. If not, cut your losses and learn from the experience so that you can better set yourself up for success the next time around.

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