What to Do When a Client Won't Pay

When reminders have gone unanswered, the next steps are more formal, and each has a text that governs it. This guide takes them in order: assemble the documents, write the letter that comes before a court claim, work out the full figure you can claim, and look at the two routes after that, a collection agency and the court.

It describes what the cited texts provide. It is not legal advice, and it does not tell you which route to take. The rules on the letter are those of England and Wales, the sums are those of the UK's late-payment Act, and the EU, German and Spanish sums are noted beside them. Courts and statutes in the United States are not covered.

Assemble the file

Put everything about the invoice in one place before you write anything formal:

• the signed contract, or the quote the client accepted;
• the invoice, with its date and its due date;
• proof that you delivered: a delivery note, a sign-off, the email that sent the work;
• the client's messages about the work;
• every reminder you sent, with its date. The guide on how to follow up on an unpaid invoice has a schedule for those.

Read the file as the client would. Sometimes it shows a query you never answered, and that is better found now than later.

One question the file may raise is whether you can stop work for this client. That depends on your contract and the law that governs it, and this guide does not cover it. Read the contract before you stop.

The letter before a claim

In England and Wales, what you do before a court claim is itself regulated. The Practice Direction on Pre-Action Conduct applies to disputes for which there is no specific pre-action protocol. Its paragraph 6 lists the steps that will usually be involved:

• Your letter. The claimant writes to the defendant with concise details of the claim: the basis on which it is made, a summary of the facts, what the claimant wants from the defendant and, if that is money, how the amount is calculated.
• The reply. The defendant responds within a reasonable time, which the paragraph puts at 14 days in a straightforward case and no more than 3 months in a very complex one.
• Documents. The parties disclose key documents relevant to the issues in dispute.

If the dispute goes to court, the court will expect the parties to have complied, and it takes non-compliance into account when it gives directions and when it makes orders for costs (paragraph 13).

A different text applies when your client is an individual. The Pre-Action Protocol for Debt Claims covers any business claiming payment of a debt from an individual, including a sole trader, and does not apply to business-to-business debts unless the debtor is a sole trader (paragraph 1.1). Under it, the creditor may start court proceedings if the debtor does not reply to the Letter of Claim within 30 days of the date at the top of the letter (paragraph 3.4).

For an unpaid invoice, a letter that follows paragraph 6 would name the contract and the invoice, give the dates of delivery, of the due date and of each reminder, state the sum you want and the date by which you want it, and show how the sum is made up. Send it in a way that leaves you proof of the date.

The figure: principal, interest and the fixed sum

"How the amount is calculated" is the part worth getting exact. Under the Late Payment of Commercial Debts (Interest) Act 1998, a business-to-business debt carries three components.

• Principal: the invoice amount.
• Statutory interest: it starts on the day after the agreed payment day (section 4), at 8% a year over the official dealing rate in force on the 30 June or 31 December before it starts to run (the rate order of 2002).
• Fixed sum: once statutory interest begins to run, the supplier is entitled to a fixed sum on top of it: £40 for a debt of less than £1,000, £70 for a debt of £1,000 or more but less than £10,000, and £100 for a debt of £10,000 or more (section 5A).

Take invoice 1043 from the follow-up guide: £2,400, with an agreed payment day of September 14, 2026, still unpaid on October 29, 2026. Interest has run for 45 days from September 15, 2026 at 11.75% a year, which is the Bank of England's Bank Rate of 3.75% on 30 June 2026 plus 8 points. The claim on that day reads:

Invoice 1043: principal £2,400.00. Statutory interest from September 15, 2026 to October 29, 2026, 45 days at 11.75%: £34.77. Fixed sum under section 5A: £70.00. Total: £2,504.77. Interest continues at £0.77 a day until payment.

The Late Payment Interest Calculator produces the interest and the fixed sum for your own dates and amount.

Outside the UK the fixed sum is a single figure. Directive 2011/7/EU entitles the creditor to a fixed sum of at least 40 euros once interest for late payment is payable (Article 6). In Germany § 288(5) BGB sets a flat 40 euros against a debtor that is not a consumer, and in Spain article 8 of Ley 3/2004 sets a fixed 40 euros. In France the fixed sum for recovery costs between businesses is 40 euros as well: the French government's page on payment periods says it applies to each invoice not paid on time, once per invoice and not per day of delay, and names articles L441-10 and D441-5 of the Code de commerce. The guide on late payment interest explains how the rates in each of those laws are built.

A collection agency or the court

If the letter's deadline passes without payment, two routes remain. This guide does not rank them. What it can state is how the texts treat the cost of each.

A collection agency pursues the debt for you and charges for doing so on terms it sets, so ask for those terms in writing before you hand over the file. The law has something to say about that cost. Under section 5A(2A) of the UK Act, if the supplier's reasonable costs in recovering the debt are not met by the fixed sum, the supplier is also entitled to the difference. Article 6(3) of the directive gives the creditor reasonable compensation for recovery costs that exceed the fixed sum, and names the expenses of instructing a lawyer or employing a debt collection agency as examples.

The court is the other route. GOV.UK describes how to apply to a county court in England and Wales for money you are owed. The guide to the dunning process for small business summarises that procedure and its German and Spanish counterparts, and the guide to business days in court filings covers how court deadlines are counted.

Settling, and making this rare

A client who cannot pay the whole sum may offer part of it, or instalments. Whether to accept is a commercial decision for you; if you do, put the agreed amounts and dates in writing and have both sides confirm them.

Four habits you could adopt for future work: agree the payment terms in writing before you start, as the guide on how to write payment terms on an invoice describes; take a deposit or stage payments on longer jobs; state on the invoice the basis on which interest will be charged; and send the first reminder the day after the due date.

FAQ

What is the first step when a client does not pay?

Put the documents in one place: the contract or accepted quote, the invoice, proof of delivery, the client's messages and every reminder you sent with its date. Each formal step that follows draws on that file.

What does a letter before a claim contain in England and Wales?

Paragraph 6 of the Practice Direction on Pre-Action Conduct describes a letter with concise details of the claim: the basis on which it is made, a summary of the facts, what the claimant wants from the defendant and, if that is money, how the amount is calculated.

How long does the other side have to reply?

The Practice Direction speaks of a reasonable time: 14 days in a straightforward case and no more than 3 months in a very complex one. Where the Pre-Action Protocol for Debt Claims applies, the creditor may start proceedings if the debtor has not replied within 30 days of the date at the top of the Letter of Claim.

Which pre-action text applies if my client is a sole trader?

The Pre-Action Protocol for Debt Claims. It applies to any business claiming payment of a debt from an individual, including a sole trader, and does not apply to business-to-business debts unless the debtor is a sole trader (paragraph 1.1).

Can I add interest and a fixed sum to the claim?

Under the UK's Late Payment of Commercial Debts (Interest) Act 1998, yes, for a debt between two businesses. Statutory interest runs from the day after the agreed payment day at 8% a year over the official dealing rate, and section 5A adds a fixed sum of 40, 70 or 100 pounds depending on the size of the debt.

Can I recover what a collection agency or a lawyer costs me?

Section 5A(2A) of the UK Act entitles the supplier to the difference where its reasonable costs in recovering the debt are not met by the fixed sum. Article 6(3) of Directive 2011/7/EU gives reasonable compensation for recovery costs above the fixed sum and names the expenses of instructing a lawyer or employing a debt collection agency.

Should I accept part payment?

That is a commercial decision for you, and this guide does not advise on it. If you accept, put the agreed amounts and dates in writing and have both sides confirm them.