Handling late-paying clients

Late payment is the tax nobody legislates for: a slow-paying client is quietly borrowing your working capital on terms you never agreed to. The playbook that works has three layers: make lateness harder up front, follow up on a rhythm rather than a mood, and know the escalation and write-off endgame so decisions are calm ones. This guide is that playbook.

Prevention beats chasing

Most late payment is friction, not malice, and friction is designable:

• Terms agreed before the work, in the contract or quote: payment window, late-payment interest if you intend to charge it (you can generally only add interest or fees the client agreed to up front), and deposits or milestones for bigger jobs.
• Invoices that pay themselves:due date, bank account, and the client's PO number, sent to the accounts address, not just your contact. The invoice guide covers the fields that speed payment.
• Invoice immediately. Every day between finishing work and sending the invoice is a day added to payment, at your end, for free.

The follow-up ladder

Decide the rhythm once, then run it without re-litigating each step:

• Day after due: a friendly note with the invoice attached. Most lateness dies here; it was an oversight.
• A week over: a direct email naming the amount and date, asking when payment will be made. Get a date; a promised date you can hold someone to changes the conversation.
• Two to three weeks over: a phone call, and for ongoing engagements, the honest question of whether new work continues while old work is unpaid. Pausing work is the strongest card a contractor holds; playing it professionally is not a rupture.
• A month over:a formal letter stating the debt and your next step. Often the letter alone, signalling you'll actually escalate, produces payment.

Escalation that fits invoice-sized debts

• The Disputes Tribunal hears claims up to $60,000 (the limit doubled in January 2026), without lawyers, for a filing fee that scales with the claim and sits far below what legal action costs. For a documented unpaid invoice (contract, delivery, invoice, follow-ups), it is genuinely accessible and its orders are enforceable.
• Debt collection agencies trade a share of the recovery for handling the chase; economics improve as the debt grows and your appetite for the relationship shrinks.
• Statutory demand or courtterritory, above the Tribunal's range or against a company that simply won't engage, is where a lawyer prices the next move against the size of the debt.

Writing it off: the tax treatment

Sometimes the right business decision is to stop. Two tax consequences soften it:

• Income tax: a debt genuinely written off as bad (actually removed from your books, with the decision recorded, before year end) is deductible against the income you returned but never received.
• GST depends on your accounting basis.On the payments basis, there's nothing to fix: you never returned GST on money that never arrived. On the invoice basis, you already paid GST on the invoice, and writing the debt off entitles you to a credit adjustment claiming it back.

How Coffer helps

Coffer keeps the pending picture honest: unpaid invoices are tracked separately as incoming money, and nothing is ringfenced or counted toward your tax picture until an invoice is actually marked paid, so a slow payer never inflates what the dashboard says you have. Per-invoice send tracking and due dates give the follow-up ladder its dates, and the invoice history is the documentation a Tribunal claim is built from.