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How to Collect Money from Clients Who Won't Pay

Contractors spend countless hours of planning and labor to complete a job. When a client doesn’t pay on time, it can be more than frustrating. To keep your business going, cash flow needs to be available to cover supplies, equipment, and manpower. So what do you do when a client doesn’t pay? We’ll discuss a few ways to protect your business and steps you can take to get your client to pay.

How to Collect Payment from a Client

Dealing with clients can be unpredictable, so your best bet is to being prepared. A solid agreement, communication, and a thorough understanding of each party’s obligations are essential in any business arrangement. Before you begin any work, start with these basics:

The Contract

Your contract protects both you and your client. It sets the foundation for the business relationship. While the cost of the job may vary, certain fundamental elements should be included in each contract:  scope of work and associated costs, schedule of work and payments, penalties for late payments. The client should know up-front how much the job will cost, when payment is due, and how they can pay. Include the exact amount that will be charged for late fees and when they will be assessed.

Deposits or Up-front Payments

When dealing with a new client or large project, client risk should be evaluated. Consider asking for a deposit or up-front payment before work begins. Check with your state and/or local authority for rules on how much you can legally charge in advance.

Make Paying Convenient

If you want to get paid on time, make sure your client knows how to pay you. Check to ensure your invoices are accurate, complete, and include any information the client needs to make payment. Include a self-addressed envelope for payments by check, along with your company’s information, so your customer can send payment with ease.  Make sure your contract, invoice, and payment reminders include payment information. Online payments can be a real convenience for both you and the client. Process payments right away and keep records updated to avoid any unnecessary issues.

How to Collect Money Owed from Clients Who Won't Pay

Get in Touch

If your client is behind on paying, the first step should be to reach out to them. The matter can be a simple mishap or misunderstanding that can be summed up in a short conversation. Or, you may find out the matter is more serious. Either way, a discussion needs to be had.

A simple phone call, email, or even sending a reminder by mail can prompt them to make a payment. In some cases, a personal visit to check on things and ask about the overdue amount may be appropriate. Perhaps there is an issue with the work performed or other problem that may be causing the owner to withhold payment. This is the time to clear up any lingering issues and get you closer to receiving final payment.  Approach each situation calmly and professionally. Threats, harassment, and acting in anger are not ethical business practices and can lead to further problems.

Demand Letters

In situations where the client refuses to pay, further action is required which may include filing a lien or a lawsuit. Time is of the essence, so acting immediately is in your best interest. The longer the debt lingers, the less likely you are to recover it. Also, most states have a timeframe in which liens and lawsuits can be filed.  

Prior to pursuing litigation or a lien, send a demand letter to your client. Unlike a payment reminder, the letter needs to state that payment is needed, the amount due (including late fees), payment deadline, and the course of action to be taken if the payment is not submitted by the specified date. Send the letter certified mail, return receipt so you have proof of delivery. You may want to also include past invoices and a copy of the contract.

Collect on Unpaid Invoices with a Courtesy Letter

Filing a Lien

A contractor can place a property lien if a client fails to pay for work. A lien is a legal document that makes it hard for the property owner to sell or refinance the property. It also adversely affects their credit score. Because a lien is a legal document, be careful that the forms you fill out are the correct ones and that they are complete.

Check with your state and county regulator for specific information on filing a lien in your state. While there are several ways to file a lien, doing so in person can help you make sure the correct forms are submitted and any corrections are made so that the lien is not rejected.

This may be enough to get the client to pay. If not, you can enforce the lien by filing a lawsuit. Should the property be sold, you may receive payment depending on where you fall in the line of debtors the client owes.


In some cases, it may be necessary to file legal proceedings. Small claims court cases limit the amount of damages the court can impose, while in superior court there is no limit on damages. If the client owes less than $10,000, small claims court may the better option. If the amount is more than the small claims court allows, superior court is where you want to file a lawsuit, and you may want to consider hiring an attorney.

It is important to make sure you have your supporting documents ready and available before filing. Include copies of the signed contract, invoices, records of correspondence with the client, photos of the work completed, clear records of your costs for supplies, labor, equipment, etc., and any other information pertaining to the transaction.

Contact BCA for Arbitration Services Today

Your business is important to you and being able to run it successfully includes getting paid on time. Remember, each situation is different and no two clients are the same. Evaluate each circumstance to determine the appropriate course of action. While no business wants to take a loss, sometimes compromises need to be made. Consider settling for a lesser amount, discounting the labor or cost of materials, even setting up a payment plan with the client. You can also contact Business Consumer Alliance for assistance with courtesy letters and arbitration services.

Learn More About Our Arbitration Services

If you choose to hire a collection agency, make sure to select a reputable one. Check out their BCA report  for information on the company, complaint history, and to read verified reviews. Select a business that meets all state licensing requirements and that has a proven record for delivering the services they offer.

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About Business Consumer Alliance Business Consumer Alliance (BCA) is a non-profit company that started in 1928. The broad purpose of BCA is to promote business self-regulation. BCA's mission is achieved by assisting consumers in resolving complaints with businesses and using that complaint information, along with other relevant information such as customer reviews, to forecast business reliability. With community support, BCA can identify trustworthy and ethical businesses and warn the public to avoid unscrupulous businesses whose purpose is to defraud the marketplace. BCA also helps businesses promote themselves by providing services and tools to protect their business and reach out to their customers. BCA obtains its funding from member businesses who support the mission and purpose of the organization and who agree to abide by high standards of ethical business practices.