What do I do when a customer refuses to pay the final invoice?

Start with a written letter of demand giving 14 days to pay. If the customer still refuses, your main paths are the state tribunal for residential disputes, Security of Payment adjudication for construction contracts, or a debt-recovery agent. Which path fits depends on your state, the contract type, and the amount owed.

Updated 05/09/2026

What should I do first when a customer will not pay?

Before you escalate, get your paper trail together. Pull out the signed contract (or quote acceptance), every invoice, any variation agreements, photos of the completed work, and any text or email exchanges about the scope. The stronger your documentation, the stronger your position in every path that follows.

Then make one more direct approach. Call the customer, not text, and ask plainly what the issue is. Sometimes non-payment is about a defect they have not raised, a misunderstanding on scope, or simply cash flow. If there is a legitimate complaint, address it. If the complaint is vague or invented after the invoice landed, note the date and what was said, and move to a letter of demand.

How do I write a letter of demand?

A letter of demand is the formal first step in every recovery path. Most state tribunals expect you to have sent one before they will hear your case. It costs nothing and resolves a surprising number of disputes on its own, because it signals you are serious.

A letter of demand should include:

• Your business name, ABN, and contact details.
• The customer's name and address.
• The invoice number, amount, and original due date.
• A clear statement that the amount is overdue and remains unpaid.
• A deadline to pay. 14 days is standard.
• What happens next if they do not pay. State that you will pursue the matter through the relevant tribunal, court, or adjudication process.

Send it by registered post (so you have proof of delivery) and keep a copy. Email a second copy if you have their email address. If you are not confident writing one, your state's fair trading body or small business commissioner usually has a free template.

What are my legal options if they still will not pay?

Once the letter of demand deadline passes, you have three main paths. The right one depends on the type of work, the contract, and the dollar amount.

1. State civil and administrative tribunal

For most residential trade work, the state tribunal is the fastest and cheapest formal path. You do not need a lawyer. Filing fees are modest. Each state has its own tribunal with its own limits (verify current caps before filing):

Hearings are informal compared to court. You bring your contract, invoices, photos, and correspondence. The tribunal makes a binding decision, and if the customer still does not pay, you can register the order and enforce it as a court judgment.

2. Security of Payment adjudication (construction contracts)

If your work falls under a construction contract, Security of Payment laws give anyone who carries out construction work or supplies related goods and services a statutory right to progress payments and a fast, interim-binding adjudication process. Every state and territory has its own Security of Payment Act:

• NSW: Building and Construction Industry Security of Payment Act 1999
• VIC: Building and Construction Industry Security of Payment Act 2002
• QLD: Building Industry Fairness (Security of Payment) Act 2017
• SA: Building and Construction Industry Security of Payment Act 2009
• WA: Building and Construction Industry (Security of Payment) Act 2021

The process works like this: you serve a payment claim, the customer must respond with a payment schedule within the statutory window (typically 10 to 15 business days depending on the state, verify the exact period for your jurisdiction), and if they do not respond or short-pay, you apply for adjudication. An independent adjudicator determines the amount, and the decision is enforceable as a debt.

The intent of the legislation is straightforward: anyone who carries out construction work or supplies related goods and services under a construction contract is entitled to receive progress payments, and the Act gives them a mechanism to recover those payments without going to court.

Security of Payment is designed to be fast. The whole process can resolve within weeks, not months. But your invoices and payment claims need to be structured correctly from the start. If you are not sure whether your work qualifies, check with your state's building authority.

3. Debt recovery agent or solicitor

For amounts above the tribunal cap, or when the customer is a company that may be trading insolvent, a debt recovery agent or solicitor is the practical path. They typically work on a percentage of the recovered amount or a fixed fee. A solicitor's letter alone often prompts payment, because it signals court proceedings are next.

For debts under a few thousand dollars, weigh the cost of recovery against the amount owed. A few hundred dollars in dispute may not justify a larger legal bill. The tribunal is almost always cheaper for small amounts.

How do I prevent this from happening again?

Recovery is expensive and stressful. Prevention is cheaper. The trades that rarely chase unpaid invoices share a few habits:

• Always use a signed written contract. Verbal variations are the single biggest source of disputes and unrecovered margin in construction. A written contract sets the scope, the price, the payment terms, and the process for variations. Most states require a written contract above a threshold for residential building work (for example, NSW for residential building work over $5,000, QLD for domestic building work over $3,300). Check the threshold for your specific trade and state. Even below it, put it in writing.
• Take a deposit before you start. A deposit confirms the customer is committed and covers your initial material costs. For guidance on how much to take and the state-by-state caps, see should I take a deposit before I start a job.
• Use progress payments on larger jobs. Break the job into stages and invoice at each stage. Do not let the full amount ride on one final invoice, because that is where the leverage tips to the customer.
• Document every variation in writing. Variations must be in writing and signed by both parties before the varied work proceeds in NSW, SA, and effectively all states. A verbal "yeah, go ahead" for extra work worth thousands is unrecoverable if the customer later denies agreeing to it. Text messages count as written evidence, so at minimum confirm the variation, the cost, and the customer's agreement in a text or email before you start the extra work.
• Invoice promptly. Send the invoice the day the work is done, not a week later. The longer the gap between completing the work and sending the invoice, the easier it is for the customer to find reasons not to pay. If you are still chasing invoices manually, see can I automate sending invoices and payment reminders from my phone.
• Photograph the finished work. Before you leave the site, photograph every area you worked on. Timestamped photos are your best evidence if the customer later claims the work was incomplete or defective.

For more on the follow-up process before things reach the formal stage, see how do I chase up invoices that customers have not paid without being rude.

When should I just walk away?

Not every unpaid invoice is worth chasing to the end. Consider walking away when:

• The amount is very small. If the disputed amount is only a couple of hundred dollars, the time and stress of formal recovery may exceed the debt itself.
• The customer is genuinely unable to pay. If they are in financial hardship, a payment plan may recover more than a tribunal order they cannot satisfy.
• Your documentation is weak. If you have no written contract, no variation records, and no photos, a tribunal hearing becomes your word against theirs. Strengthen your systems for the next job instead.

Walking away is a business decision, not a weakness. But use the experience to tighten your process: a signed contract, a deposit, progress payments, and documented variations will stop most non-payment before it starts.