A customer will not pay your invoice. What are your options?

When a customer refuses to pay, your options come down to what you already have in place with them: signed terms of trade, the right legal entity, a personal guarantee, security registered, and a clear record of what was agreed and delivered. The first job is to stop the exposure growing. The second is to work out which of your options is worth using here.

First, what is actually happening?

“They will not pay” covers four quite different situations, and the right move is different for each one.

• They are disputing something. They are arguing about the price, the scope, or part of the work. Sometimes that is genuine and sometimes it arrives only once the invoice falls due, and what tells them apart is your records rather than your instinct. The five types of customer who do not pay covers both versions.
• They have gone quiet. No answer to your calls, no reply to your emails. That is its own situation with its own sequence, set out in what to do when a customer stops replying.
• They keep saying they will pay, and then do not. Friday comes and goes. Then the next Friday. Verbal promises are the currency of non-payers, and a pattern of broken ones is information in itself.
• They are giving you excuses. Waiting on another payment. Cash flow is tight this month. Can you resend it. Some of those are true, and a customer who genuinely cannot pay needs a structured arrangement rather than more pressure. If the reason is that their own customer has not paid them, that has its own page.

Being specific about which one you are in matters, because it changes what is worth doing next and what it will take.

What your options are, and what decides them.

With a customer who is already refusing to pay, the work is to identify what you have in place with that particular person. Did they sign your terms of trade? Do you have a personal guarantee? Is there security registered? What are your pathways to seek a resolution, and what leverage do you actually have?

Then it becomes a process of elimination, and a question of priority. Is this an important customer who simply has not paid you? Is it a big job you need that money from? The answers change what is worth doing, and what is worth the time and the energy it will take.

That is an uncomfortable thought, because it means the strongest moves available to you today were mostly decided before the job started, when nobody thought there would be a problem. It is also the useful part, and the second half of this page is about it.

First, stop the exposure from growing.

While an invoice sits unpaid, the question is whether you are still adding to it. More labour, more materials, more of your week held open for them. If a customer is not paying, stopping is a reasonable commercial response, and you have to be able to make it, because you are not a bank.

On a longer job, this is what a suspension right is for. If you are two months into a project and they have not paid for the first month, that is your ability to say you are not doing any more until the bill is paid. Check what your own contract and terms allow before you stop, particularly on a construction contract, and put the decision in writing.

The instinct runs the other way. It usually sounds like I just need to finish the job so I can get my money, and it is completely understandable. It can also make things worse, because every extra day of work increases the amount you have exposed to somebody who has already shown you how they behave when the invoice falls due. And the time you hold open for a stalled job is capacity you are not selling to anybody else, which is a real cost that never appears on an invoice.

What happens when you keep giving ground.

One of our clients is a manufacturing business in the residential building space. They are one of the essential parts of what it takes to get a house built, sitting right in the middle of a long chain of dependency, with dozens of trades stacked in sequence and everybody relying on everybody else.

Their jobs are not small. Twenty thousand, thirty thousand, fifty thousand dollars a project, sometimes more. They carry the materials, the manufacturing time, the labour and the logistics long before they earn a dollar of margin. Even when everything is done properly, with materials invoiced along the way and payments staged, most of that money is break-even. The profit sits in the final portion of the payment.

If that final payment does not come through, you have effectively done a full project for free.

The customer in this case knew exactly how the system works. They raised complaints. They nit-picked. They withheld payment, and they pushed, knowing every delay hurts the supplier far more than it hurts them.

Our client did everything they thought was reasonable. They reduced invoices. They offered discounts. They tried to keep the relationship intact. They absorbed cost after cost in the hope of getting to a resolution. And still no payment.

That is worth remembering if you are about to knock something off the bill to get this settled. Against a customer who is using the delay deliberately, giving ground rarely buys payment. In that case it bought nothing at all.

There is also a mechanic most owners meet for the first time in the middle of it. Once a debt is in dispute, a collection generally stops where it stands, whatever the invoice says and however much work was done. Where things go from there is its own subject, and it is worth understanding before you rely on sending the account somewhere.

If they are withholding over part of the job.

Sometimes a customer has a genuine issue with one element of the work, and the whole invoice goes unpaid because of it. Handle those separately. If part of the job is genuinely in question, deal with that part on its own merits, and the rest of the invoice still needs to be paid. A problem with one item is not a reason for none of it to be paid, and letting the two run together is how somebody gives themselves an out from paying anything at all.

Why this lands harder when you sell work rather than goods.

A supplier who is not paid has goods in the picture, and sometimes a way to secure an interest in them. When the work itself is the product, there is nothing to take back. You have laid the driveway. You are very tempted to go and dig it up, and we all know you cannot do that. The work is done, the customer has the benefit of it, and the only thing left to argue about is money.

That is why the protection has to be built before the work starts rather than after the invoice is ignored, and it is why doing more work so rarely improves the position.

What changes for the next one.

The list is short, and each item is one of the options you wished you had this time: terms of trade that have actually been accepted, the correct legal entity on the paperwork, a credit check before the work rather than after the invoice, a deposit and progress payments so you are never carrying the whole job, security where the exposure is large, and a point you have decided in advance at which work stops.

We cover those foundations in what to do when you are not being paid for work you have done, which also has the eight things worth establishing about the situation you are in right now.

If there is an invoice they are refusing to pay, you do not have to decide the next move on your own.