Start by checking your own side
Before you contact anyone, confirm the invoice was sent to the right address, matches the agreed price and has not already been paid. Check for an unapplied payment. Few things hurt more than a firm demand for something the customer already settled.
Also check whether the customer raised a complaint. A disputed invoice needs a different conversation than an ignored one.
Stage one: friendly reminders
Send a short email the day after the due date. State the invoice number, amount and how to pay, and ask them to confirm it is in the payment run. Attach the invoice again. Many accounts payable teams only need a nudge.
If there is no reply in a few days, send a second reminder and try a phone call. A real conversation often reveals the reason, like a missing purchase order, and you can fix it on the spot.
Stage two: firmer follow-up
If it is a few weeks overdue, write a clear message that states the amount, the original terms and a specific date by which you expect payment. Mention that further work or orders may be paused until the account is current, if your contract allows it.
Keep a log of every contact with dates and what was said. If it goes further, the record matters.
Offer a way out
Customers in a tight spot may pay if you offer a payment plan. Put the plan in writing with amounts and dates, and make it clear that missing a payment makes the full balance due. A partial payment is better than none, and it keeps the relationship open.
Be careful about promises to reduce the balance. Discounts for quick payment of an old debt can set an expectation for the future.
Stage three: formal steps
When friendly efforts fail, send a formal demand letter. Past that point, options include a collection agency, small claims court or an attorney. Each has costs, time and limits, and the right choice depends on the amount and the customer.
Debt collection is regulated, so do not threaten or harass anyone. Ask an attorney before taking legal action. Consider writing off the balance if collecting is not worth it, and record it properly in the books. Then change your terms with new customers so it does not recur.
Accounting for what you cannot collect
If a balance will not be paid, do not let it sit in receivables forever. A balance that old overstates your assets and your income. Once you decide it is uncollectible, write it off with a clear note, and keep the collection record. Your tax preparer can explain how bad debt is treated for taxes, which depends on your accounting method.
If the customer pays later, reverse the write-off and record the payment normally.
Common questions
When should I stop doing work for a late customer?
Check your contract. Many businesses pause work once an invoice is a set number of days overdue, with notice.
Do I need a lawyer for a demand letter?
Not always, but an attorney can add weight and make sure the wording is lawful.
Can I charge interest on late invoices?
Only if agreed in writing, and subject to local limits. Ask an attorney for the rules that apply.
This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation.