Chasing unpaid invoices from another business can be frustrating, time-consuming, and financially draining. Whether you're a sole trader, contractor, or small business owner, being left out of pocket affects your cash flow and business operations. Fortunately, Australian law provides structured avenues for recovering your money.

This article explores your legal options through the lens of Litigation and Dispute Resolution, so you can take smart steps to recover what you’re owed.

Confirm the Debt and Check the Agreement

Before escalating the issue, it's crucial to confirm the exact nature of the debt:

• Was there a written contract?
• Were payment terms clearly stated on the invoice?
• Has the payment due date passed?

Even if the agreement was verbal, you may still have a claim. Gathering evidence of services rendered or goods supplied—including emails, receipts, and communication—is essential.

Send a Formal Payment Reminder

Your first step should always be a professional and courteous payment reminder. This is often enough to prompt payment if the delay was due to oversight.

Follow up with:

• A written reminder
• Clear reference to the amount and due date
• Your contact information for follow-up

If the client still refuses to pay, you may proceed to more formal dispute resolution methods.

Issue a Letter of Demand

A Letter of Demand is a formal request for payment before taking legal action. This letter should outline:

• The nature of the debt
• Any prior attempts to recover payment
• A final deadline (e.g., 7–14 days) before further legal action is taken

Having a solicitor draft the letter adds weight and often prompts faster responses.

Consider Alternative Dispute Resolution (ADR)

If the business still refuses to pay, consider Alternative Dispute Resolution (ADR) methods before heading to court. These include:

Mediation A neutral third party helps both sides reach a mutually agreeable outcome. Mediation is cost-effective and usually quicker than litigation.

Arbitration This is more formal than mediation and results in a binding decision by an independent arbitrator.

ADR can often preserve business relationships and avoid negative publicity.

Taking Legal Action

If all else fails, legal action through the courts may be necessary. Your options include:

Small Claims Court (under $100,000) Each state has a Small Claims or Civil Claims Division. For example, in NSW, claims under $20,000 can be heard in the Local Court.

Magistrates' or District Court (higher-value claims) For larger or more complex debts, litigation through higher courts may be required. Legal proceedings typically involve:

• Filing a Statement of Claim
• Serving legal papers to the debtor
• Awaiting a response or defence
• Attending a court hearing if unresolved

If judgment is made in your favour and payment is still not received, enforcement options may include garnishee orders or seizing property.

Recovering Legal Costs

In many cases, if you are successful in litigation, you may be awarded costs, meaning the debtor pays part or all of your legal fees. However, costs are not guaranteed, especially in small claims matters.

To assess whether legal action is commercially viable, consider:

• The likelihood of recovering the debt
• Whether the debtor is solvent
• The potential cost of proceedings

When to Engage a Litigation and Dispute Resolution Lawyer

Not every matter needs to escalate to litigation, but early legal advice can clarify your options and protect your position from the start. A commercial dispute lawyer can help:

• Draft a legally sound Letter of Demand
• Represent you in mediation or arbitration
• Initiate court proceedings
• Enforce any judgment obtained

If you're dealing with unpaid invoices and the stress of chasing debts, New South Lawyers is here to help. Our Litigation and Dispute Resolution team specialises in helping individuals and businesses resolve disputes swiftly and cost-effectively.

Let us help you reclaim what you’re owed. Speak to a legal expert today to protect your financial interests and restore peace of mind.

Contact New South Lawyers today for a confidential consultation.