Handling late-paying clients

A slow-paying client is effectively borrowing your working capital on terms you never agreed to. The approach that works has three parts: make lateness harder up front, follow up on a set schedule rather than when it happens to cross your mind, and understand the escalation and write-off options so you can make those decisions calmly. This guide walks through all three.

Prevention beats chasing

Most late payment comes down to friction rather than bad intent, and you can design a lot of that friction out:

• 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 are easy to pay: due date, bank account, and the client's PO number, sent to the accounts address rather than just your usual 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 schedule once, then follow it without rethinking each step:

• Day after due: a friendly note with the invoice attached. Most late payment is sorted at this stage, because it was an oversight.
• A week over: a direct email naming the amount and date, asking when payment will be made. Try to get a specific date, because a 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 one of the strongest positions a contractor holds, and raising it professionally doesn't have to damage the relationship.
• A month over: a formal letter stating the debt and your next step. Often the letter alone, which shows you're prepared to escalate, is enough to produce 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 well 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 take a share of the recovery in return for handling the chase. This tends to make more sense as the debt grows and you have less interest in keeping the relationship.
• Statutory demand or court comes into play above the Tribunal's range, or against a company that simply won't engage. At that point a lawyer can price the next move against the size of the debt.

Writing it off: the tax treatment

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

• 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 tracks your unpaid invoices separately, as money that's still incoming. It doesn't ringfence any tax or add anything to your dashboard total until you mark an invoice paid, so a slow payer can't inflate what Coffer says you have. Each invoice records when you sent it and when it's due, so you know when to move to the next step of the follow-up ladder. And the invoice history gives you the paper trail you'd need for a Disputes Tribunal claim.