# How to collect unpaid invoices: a five-step ladder

> How to collect unpaid invoices step by step: reminders, demand letters, interest, payment plans, agencies and court, with UK, US and German rules.

Canonical: https://www.invoqk.com/blog/how-to-collect-unpaid-invoices-a-five-step-ladder
Last updated: 2026-11-04

## Key takeaways

- Collect an unpaid invoice in five steps: check it, send a friendly reminder, send a firm demand, send a final notice, then choose a payment plan, an agency or a court claim.
- Between UK businesses, the Late Payment of Commercial Debts (Interest) Act 1998 allows 8% above base rate plus a fixed £40, £70 or £100; German business customers owe nine percentage points over base plus €40 under § 288 BGB.
- If the client disputes the invoice, resolve the dispute before sending more letters; if the client goes silent, continue the ladder and keep proof of every message.

You sent the invoice, did the work and the money has not arrived. Most unpaid invoices are recovered with a calm sequence of messages, not a court case. This guide shows how to collect unpaid invoices in five steps, what each step costs and when each one is the right move in the UK, the USA and Germany.

In brief: check the invoice, remind the client, send a firm demand, give a final notice, then choose between a payment plan, an agency and a court claim.

![The five-step ladder for an unpaid invoice](https://www.invoqk.com/charts/unpaid-invoice-ladder.svg)

## What is unpaid invoice collection?

**Unpaid invoice collection** is the process of recovering money a customer owes after the due date has passed. It runs from a polite reminder through formal letters to a collection agency or a court claim. The earlier steps cost almost nothing and recover most of the money.

The same process is also called overdue invoice recovery or debt recovery. The aim is the same everywhere: get paid while keeping the client relationship intact where possible.

## Step 1: Check the invoice before you chase

Before you chase, confirm that the invoice is correct and was received. A surprising share of "unpaid" invoices were never delivered, were sent to the wrong person or carry a mistake. Chasing a flawed invoice damages your position.

Check these six points:

1. The invoice number, date and amount match your records.
2. The client's name and billing address are right.
3. The due date is written on the invoice, not only "net 30".
4. The invoice reached a person who can approve it.
5. A purchase order number is quoted if the client requires one.
6. Your bank details are correct.

Then work out how late the invoice is. The [invoice due date calculator](/invoice-due-date-calculator) turns terms such as Net 30 or end of month into an exact date, so you can state the number of days overdue with confidence.

## Step 2: Send a friendly reminder

Send a friendly reminder the day after the due date, or up to a week later. Assume the client forgot. Attach the invoice and give the payment details again.

A short reminder is enough: name the invoice, the amount and the due date, and ask for payment by a specific date. You can write one in seconds with the [payment reminder email generator](/payment-reminder-email-generator). For example, a reminder that arrives on day 3 recovers many invoices that simply slipped through an accounts-payable queue.

If you want the full wording, see our guide, Collection letter templates: 3 stages with free samples, which includes a reminder, a firm demand and a final notice.

## Step 3: Send a firm demand letter

Send a firm demand letter when the reminder gets no reply, usually about three weeks after the due date. State that the invoice is overdue, give a deadline of 7 to 14 days and name the consequence.

Interest and fees belong in this letter, but only if you can claim them:

- **UK.** Between businesses, the [Late Payment of Commercial Debts (Interest) Act 1998](https://www.legislation.gov.uk/ukpga/1998/20/contents) allows interest at 8% above the Bank of England base rate. It also allows a fixed sum of £40, £70 or £100 depending on the size of the debt.
- **Germany.** Against a business customer, [§ 288 BGB](https://www.gesetze-im-internet.de/bgb/__288.html) allows default interest of nine percentage points above the base rate and a flat fee of €40.
- **USA.** There is no federal late-interest rule for business invoices. Your contract or invoice terms decide the fee, so state it on the invoice before you rely on it.

The [late fee calculator](/late-fee-calculator) computes the interest and fee for any amount and number of days. Our post on how to calculate interest on a late invoice in the UK walks through the UK formula, and our post on late payment interest in Germany from July 2026 covers the current German rate.

## Step 4: Send a final notice

Send a final notice about five weeks after the due date. Give a short deadline, usually 7 days, and say exactly what you will do next. Then do it.

The final notice should include:

- The invoice number, amount and original due date
- The interest and fees added, if any
- A final deadline and how to pay
- The next step: a claim, an agency or legal advice

Send it by email and by tracked post. Proof of delivery matters if you go further. The legal rules differ by country, so check them before you name a specific step.

## Step 5: Choose between a payment plan, an agency and a court claim

After the final notice, you have three real options. The right one depends on the amount, the client and the evidence.

| Option | Best when | Typical cost |
|---|---|---|
| Payment plan | The client wants to pay but cannot pay in full | None, but put it in writing |
| Collection agency | The debt is clear and the client ignores you | Usually a share of what is recovered |
| Court claim | The amount is worth the fee and the debt is undisputed | Court fee and your time |

![What to do next with an overdue invoice](https://www.invoqk.com/charts/unpaid-invoice-decision.svg)

A payment plan is often the fastest route to cash. Agree dates and amounts in writing, and state that the full balance falls due again if one payment is missed.

## How do you collect an unpaid invoice in the UK?

In the UK, the usual route is a letter before claim and then a county court money claim. For a business-to-business debt, the [Practice Direction on Pre-Action Conduct](https://www.justice.gov.uk/courts/procedure-rules/civil/rules/pd_pre-action_conduct) expects you to write to the debtor first. It treats 14 days as a reasonable reply time in a straightforward case.

The Pre-Action Protocol for Debt Claims covers debts owed by individuals. According to the [Ministry of Justice debt claims protocol](https://www.justice.gov.uk/documents/debt-pap.pdf), it does not cover business-to-business debts unless the debtor is a sole trader. If your client is a sole trader, read that protocol before you start a claim.

You can start the claim online through [Money Claim Online](https://www.gov.uk/government/publications/money-claim-online-user-guide/money-claim-online-mcol-user-guide). The court fee depends on the amount claimed and is added to what you ask the debtor to pay. Check the current fee table on GOV.UK before you file.

## How do you collect an unpaid invoice in the USA?

In the USA, you can usually collect your own business invoices without special permission, but state law decides the details. The Fair Debt Collection Practices Act mainly covers consumer debts and third-party collectors. The [Consumer Financial Protection Bureau](https://www.consumerfinance.gov/ask-cfpb/what-laws-limit-what-debt-collectors-can-say-or-do-en-329/) explains that it generally does not reach the original creditor, and the [FTC debt collection FAQ](https://consumer.ftc.gov/articles/debt-collection-faqs) says business debts are not covered.

Three practical points follow:

- Collect under your own name. The [FTC business guidance on the FDCPA](https://www.ftc.gov/business-guidance/blog/2015/12/think-your-companys-not-covered-fdcpa-you-may-want-think-again) warns that a creditor who suggests a third party is collecting can become a covered collector.
- State laws can apply to original creditors, so check your state's rules before you escalate.
- Small claims courts hear lower-value claims without a lawyer. The maximum claim differs by state, so look up your state court's limit.

If you sell to consumers, take extra care. Keep every message factual and avoid threats you cannot carry out.

## How do you collect an unpaid invoice in Germany?

In Germany, a business customer is in default 30 days after the payment is due and the invoice is received. [Section 286 BGB](https://www.gesetze-im-internet.de/bgb/__286.html) sets that rule, and a reminder letter, the *Mahnung*, can cause default earlier. Once the client is in default, interest and the €40 flat fee apply.

If the client still does not pay, the next step is the court payment order, the *Mahnbescheid*. According to the [German dunning court portal](https://www.mahngerichte.de/verfahrensueberblick/verfahrensablauf/widerspruch/), the debtor has two weeks from service to pay or object. If the debtor does not object, you can apply for an enforcement order, the *Vollstreckungsbescheid*. If the debtor objects, the case moves to a normal court procedure.

## What is a worked example of collecting a €4,800 invoice?

A graphic designer in Germany invoices a business client €4,800 on June 2 with payment due on June 16. The client does not pay and does not answer. The table shows a sensible schedule.

| Date | Action |
|---|---|
| June 17 | Check the invoice was received and is correct |
| June 23 | Friendly reminder by email |
| July 7 | Firm demand with a 10-day deadline, interest and €40 fee added |
| July 21 | Final notice with a 7-day deadline |
| July 28 | Apply for a *Mahnbescheid* through the dunning court |

Each step records a date and an amount. If the client later disputes the invoice, the designer has a clear timeline.

## What should you say when you phone the client?

A phone call often works faster than a fourth email. Call the person who approves payments, not the person who hired you. Keep the call short and factual, and follow it with an email that records what was agreed.

A simple script has four lines:

1. "I am calling about invoice [number] for [amount], which was due on [date]."
2. "Can you tell me when it will be paid?"
3. "Is there anything missing that is holding up payment, such as a purchase order number?"
4. "I will email you now to confirm the date we agreed."

Write down the name of the person, the date and the promise. If the client gives a payment date, put it in the follow-up email and ask for a reply to confirm. A confirmed date turns a vague promise into a commitment you can refer to in the next letter.

## How do payment plans work for an unpaid invoice?

A **payment plan** is a written agreement to pay an overdue invoice in instalments. It gives a client who is short of cash a way to pay, and it gives you a dated schedule instead of silence. Most plans work best when they are short.

Include these terms in every plan:

- The total amount owed and the invoice numbers it covers
- The date and amount of each instalment
- What happens if an instalment is missed, for example the full balance falls due at once
- Whether interest or fees continue to apply
- A line for the client to confirm by return email

Do not release new work until the first instalment arrives. If the client misses a payment, move straight to the final notice rather than renegotiating again.

## What records should you keep before you escalate?

Keep a simple file for every overdue invoice. A court, an agency or a lawyer will ask for it, and a clear file makes any claim faster and cheaper. A tidy file also helps if the client later disputes the work.

Save these items together:

- The signed quote, contract or order confirmation
- The invoice and proof that it was delivered
- Every reminder, letter and reply, with dates
- Notes of phone calls, with the name of the person you spoke to
- Evidence the work was delivered, such as a signed delivery note or approved files
- Your calculation of interest and fees, if you charge them

Name the files by date so the story reads in order. If the matter does reach a court, you can hand over one folder instead of searching your inbox.

## What mistakes make unpaid invoices harder to collect?

Five mistakes cause most of the damage. Avoid them and you collect faster and with less risk.

1. **Waiting too long.** Debts get harder to collect with time. Start the sequence in the first week.
2. **Vague demands.** Always name the invoice, the amount and the date.
3. **Charging fees with no basis.** Add interest or fees only if your contract or the law allows them.
4. **Mixing a dispute with collection.** If the client disputes the invoice, resolve that first and pause the letters.
5. **Skipping the record.** Keep every email, letter and proof of delivery.

## How can you stop invoices going unpaid in the first place?

Prevention beats collection. Four habits reduce late payment more than any letter:

- Send the invoice the day the work finishes.
- Write the exact due date on the invoice.
- Ask for a deposit on larger jobs.
- Track how long clients really take to pay. The [DSO calculator](/dso-calculator) turns your receivables and sales into an average collection time.

Invoqk creates an invoice with a due date and payment details from a plain-text description, free and without signup.

## FAQ

### How long should I wait before chasing an unpaid invoice?

Chase the day after the due date or within a week. A friendly reminder costs nothing and recovers many invoices. Wait longer only if your contract gives a grace period.

### Can I charge interest on an unpaid invoice?

Only if your contract or the law allows it. In the UK, the Late Payment of Commercial Debts (Interest) Act 1998 allows 8% above base rate between businesses. In Germany, § 288 BGB allows nine percentage points above base rate for business customers.

### When should I use a collection agency?

Use an agency when the debt is clear, the client ignores your letters and the amount is worth the agency's share. Agencies usually take a percentage of what they recover, so compare that cost with a court claim.

### Can I take a client to small claims court for an unpaid invoice?

Often yes. Small claims courts handle lower-value claims without a lawyer, and the limit depends on the country or state. Check your local court's limit and its pre-claim rules first.

### What if the client says they will pay but never does?

Agree a dated payment plan in writing. Ask for the first payment now and state that the full balance falls due if one payment is missed. If the plan fails, move to the final notice.

### Do I need a lawyer to collect an unpaid invoice?

Not for the first steps. You can send reminders and letters yourself. Consider a lawyer when the amount is large, the contract is unclear or the client disputes the invoice.

## Related

- [Free invoice template guides: compliance & getting paid](https://www.invoqk.com/blog)
- [Invoqk home](https://www.invoqk.com)