Quick answer
Chase unpaid invoices with a fixed timeline: a friendly reminder a few days before the due date, a firm reminder the day after, a phone call at one week overdue, a written demand at two to three weeks, then a decision about stopping supply, using a collection agency or filing a claim. In New Zealand the Disputes Tribunal can settle claims up to $60,000, without lawyers, for a modest fee.
Key points
- A written timeline, followed every time, collects more than occasional bursts of chasing.
- Phone calls work better than emails once an invoice is a week overdue.
- Stop extra supply to overdue customers before the debt gets bigger.
- The Disputes Tribunal handles small claims up to $60,000 without lawyers.
Nobody starts a business looking forward to debt collecting. Most owners chase late payers in bursts: nothing for weeks, then a flurry of awkward calls when the bank balance gets frightening. A simple system, written down and followed every time, takes the emotion out of it and collects far more.
Why do invoices go unpaid?
Before you chase, it helps to know what you’re dealing with. Most overdue invoices fall into one of four groups:
- Forgotten or lost. The invoice went to the wrong inbox, or is waiting for someone’s approval. A reminder fixes it.
- Disputed. The customer isn’t happy with part of the work or the price. Silence won’t fix it; a conversation will.
- Cash-strapped. The customer wants to pay but can’t yet. A payment plan may be the best outcome.
- Habitual. Some customers pay late because nobody has ever made them pay on time. A consistent process changes that behaviour.
The first two account for a surprising share of late payments, which is why an early, friendly reminder is so effective.
What does a good chasing timeline look like?
| When | Action | Tone |
|---|---|---|
| 3 days before due | Friendly reminder email with the invoice attached and a payment link | Helpful |
| 1 day after due | Reminder: “This invoice is now overdue” | Polite, clear |
| 7 days overdue | Phone call to the person who approves payment | Direct, practical |
| 14 days overdue | Written notice, restating terms and asking for payment by a firm date | Firm |
| 21 to 30 days overdue | Pause further work or supply until paid, if your terms allow | Business-like |
| 30+ days overdue | Final written demand, then collection agency or Disputes Tribunal | Formal |
Accounting software can automate the first two steps. The phone call is where most money is actually collected, because it gets you a person, a reason and a date.
What should you say on the call?
Keep it short and factual. A simple script:
“Hi, it’s Sam from the joinery. I’m calling about invoice 1042 for $4,600, which was due on the 20th. Can you tell me where it’s up to and when we can expect payment?”
Then stop talking and listen. If there’s a problem with the work, deal with it. If they need time, agree a specific date or a short payment plan, confirm it in writing that day, and diary a follow-up. Vague promises (“we’ll sort it soon”) are where invoices go to die.
When should you stop supplying?
Earlier than most owners do. Continuing to deliver to a customer who hasn’t paid the last three invoices just increases the amount at risk. If your terms of trade allow you to suspend work on overdue accounts, use them, politely, around the three-week mark. Many customers find the money surprisingly quickly once supply stops.
This is also where clear payment terms earn their keep: you can point to what was agreed instead of negotiating from scratch.
How does the Disputes Tribunal work?
For debts that are disputed or ignored, New Zealand’s Disputes Tribunal offers a relatively quick and inexpensive route. It can settle claims up to $60,000, hearings are informal, and lawyers generally don’t appear for the parties. The fee depends on the size of the claim, and the details are on the Disputes Tribunal website.
Before filing, gather the quote or contract, your terms of trade, the invoice, proof the work was done, and your record of reminders and calls. A tidy file makes the process much easier, and often a customer will pay once they realise you’re serious.
For larger or more complex debts, or where a customer may be insolvent, talk to a lawyer about your options.
Illustrative example
A Hamilton landscaping company had $38,000 of invoices more than 30 days overdue spread across nine customers. It introduced the timeline above, automated the reminders and set aside an hour every Tuesday for calls. Within two months, overdue invoices dropped to under $10,000. One customer disputed part of a job; a site visit and a small credit settled it. One went to the Disputes Tribunal and paid before the hearing.
How does bad debt affect GST and tax?
If you account for GST on the payments basis, an unpaid invoice never generated GST, so there’s nothing to reverse. On the invoice basis, you’ve already paid GST on that sale; when a debt is written off, you can generally claim the GST back. Your accountant will treat the write-off for income tax. See GST payments vs invoice basis for why this matters.
When the chasing is working but cash is still tight
A good process shortens the wait, but it can’t make a council or a large main contractor pay faster than its own systems allow. If slow-paying, reliable customers are a permanent feature of your business, the answer may be a working capital buffer. Our page on how big your cash reserve should be is a good starting point, and you can check your funding options in about a minute.
Getting back on the front foot
Collecting what you’re owed is the cheapest money you’ll ever find. If the business still needs working capital to carry its debtors while it grows, talk to us. We consider unsecured options for trading businesses and loans secured on residential or commercial property. There’s no credit check to enquire, your details aren’t passed around to other lenders, and a real person reads every enquiry. Accurate answers on the form mean the first call can be genuinely useful. See if you qualify.
Frequently asked questions
How soon should I chase an unpaid invoice?
Start before it's late: a friendly reminder two or three days before the due date catches forgotten invoices. Follow up the day after it's overdue, then phone within a week.
What is the Disputes Tribunal claim limit?
The Disputes Tribunal can settle claims up to $60,000. The application fee depends on the amount claimed; check the current fees on the Disputes Tribunal website.
Can I charge interest or collection costs on overdue invoices?
Only if the customer agreed to it in your terms of trade before the work was done. That's why written terms of trade matter: they set out late payment interest and recovery costs in advance.
When should I write off a bad debt?
When you've genuinely exhausted reasonable recovery steps and decided the money won't be paid. Your accountant will record it properly, and if you account for GST on the invoice basis you may be able to claim back the GST you paid on it.
Should I use a debt collection agency?
It's an option for debts that are undisputed but ignored. Agencies usually charge a commission or fee, so weigh that against the amount owed and the time you'd otherwise spend.