A good payment-default response is a sequence, not a stack of reminder emails.

Before the checklist, answer the five questions businesses ask most often.

Five questions first

1. Should we stop supplying immediately?
Not automatically. Check the contract, applicable law, operational consequences and whether suspension itself could become a breach.

2. Can we add interest?
Possibly, if a contract or applicable statutory regime allows it. Do not copy a rate from another jurisdiction.

3. Should the lawyer send the first serious letter?
Sometimes. Use counsel early when deadlines, termination, insolvency, disputed liability or large amounts make wording consequential.

4. Can we demand the full invoice if part is disputed?
You can state your position, but operationally it is useful to separate admitted and disputed amounts.

5. Does a promise to pay reset every legal deadline?
Do not assume so. Limitation, acknowledgment and procedural effects are jurisdiction-specific.

Now run the file in order.

1. Confirm the exact debtor

Check legal entity name, registration or company number where available, contract party, invoice recipient, trading name versus legal entity, and any guarantor, parent or affiliate only if actually documented.

Never sue the logo.

2. Confirm the invoice is genuinely due

Match the signed contract or order, delivery or performance, acceptance milestone, invoice date, agreed payment period, credit notes and prior variation.

A bookkeeping due date is evidence of your process, not automatically the legal answer.

3. Reconcile the amount

Create one line:

Gross invoice – valid credits – payments received – agreed deductions = claimed balance

If the buyer disagrees, show exactly where.

4. Split admitted and disputed money

Use two buckets.

Admitted: buyer accepts the liability but has not paid.
Disputed: buyer contests price, performance, quality, quantity, set-off or another basis.

Treating both buckets identically can slow recovery.

5. Ask for the non-payment reason in writing

Do not accept “finance is working on it.”

Ask whether the invoice is approved, whether any amount is disputed, what exact document is missing, what payment date is scheduled, and who owns final approval.

6. Preserve the evidence file

At minimum keep the contract, PO or order confirmation, delivery proof, inspection or acceptance material, invoice, account statement, payment history, debtor communications, relevant credit notes and amendments.

Keep originals and exports, not screenshots only.

7. Identify the governing law and forum

Find the clauses for governing law, court or arbitration, seat, notice, service, escalation and any contractually stated limitation or claim period.

Do not wait until the demand letter is sent to read them.

8. Check whether an international sales regime matters

For qualifying international goods sales, CISG issues may arise. UNCITRAL's status table helps identify treaty status, but counsel should confirm applicability, exclusions and declarations for the actual transaction.

If the debt arises from services or another excluded transaction, a different framework may apply.

9. Determine the legal basis for interest and recovery costs

Possible sources include the contract, statute, applicable international rules or principles, and court or arbitral powers.

The UK late-commercial-payment regime is one jurisdiction-specific example. EU Member States implement the Late Payment Directive within their legal systems.

Record the source before calculating the number.

10. Check the clock

List the contractual notice deadline, dispute escalation deadline, arbitration or court limitation, insolvency claim deadline if applicable, internal credit-insurance deadline, and guarantee demand deadline.

A friendly payment promise should not make the company forget a hard external date.

11. Check the debtor's financial signals

Look for lawful, reliable indicators such as missed payments to others, formal insolvency filing, closure of locations, director or ownership changes, sudden requests for long extension, returned payments, and public enforcement actions where available.

Do not turn rumor into a fact.

12. Decide the commercial objective

Choose one primary objective:

  • immediate cash;
  • preserve customer;
  • secure a payment plan;
  • stop further exposure;
  • recover goods if legally possible;
  • establish a legal precedent;
  • protect insurance or guarantee rights.

Different objectives justify different messages.

13. Prepare three settlement positions

Before negotiating, write:

Target: what you actually want.
Acceptable: minimum commercial deal.
Walk-away or escalation: what triggers the next formal step.

Include dates, not just amounts.

14. Choose the communication level

Possible sequence:

  1. AP reconciliation;
  2. commercial escalation;
  3. formal rights-reservation or demand;
  4. lawyer-to-lawyer discussion;
  5. mediation, arbitration, litigation or insolvency route.

Skip levels only for a reason.

15. Decide whether future supply continues

If the relationship continues, ask whether to require cash in advance, shorter terms, lower credit limit, partial suspension, collateral or guarantee, or smaller orders.

The best recovery sometimes includes preventing the next unpaid invoice.

16. Create the decision record

One page:

  • amount;
  • due date;
  • admitted or disputed split;
  • debtor reason;
  • legal route;
  • next deadline;
  • settlement authority;
  • next action;
  • owner.

This stops the file from being re-decided from memory every morning.

Legal boundary: interest is not a copy-paste number

GOV.UK describes statutory interest for qualifying late B2B payments under the UK regime, while the 1998 Act sets the legal structure. EU Directive 2011/7/EU uses its own framework for commercial late payment within its scope. CISG Article 78 addresses interest on sums in arrears for transactions governed by the Convention.

Those regimes do not create one global late-payment rate. Confirm the applicable source before using a number in a demand.

Stop signs that justify earlier legal review

Escalate sooner if the debtor denies the contract, material fraud is suspected, limitation is close, insolvency is filed or imminent, a large set-off or counterclaim appears, critical goods are being held, guarantee or security deadlines are running, or debtor assets are moving jurisdictions.

Decision 17: choose the evidence package before choosing the tone

A friendly reminder, a CFO escalation and a formal demand should not be built from different facts. Prepare one verified core packet first:

  • contract/PO;
  • invoice;
  • delivery or milestone record;
  • statement of account;
  • buyer acknowledgment or dispute message;
  • calculation of principal and any separately claimed amount.

The tone can change. The source facts should not.

Decision 18: define the stop condition

Every collection route needs a point at which you stop repeating it.

Examples:

  • “If no substantive response by 17:00 Friday, move from finance follow-up to formal demand.”
  • “If installment two is more than five business days late, counsel reviews the agreed fallback.”
  • “If the buyer produces a documented defect claim, pause ordinary collection and move to liability review.”

A stop condition converts frustration into a controlled escalation.

Decision 19: preserve the customer-risk decision separately

The legal claim and the credit decision are related but not identical.

Ask separately:

  • Do we continue shipping?
  • Cash in advance?
  • Reduce credit limit?
  • Suspend new orders?
  • Require security?
  • Escalate approval for exceptions?

A creditor can protect future exposure even while the existing debt is being negotiated.

Decision 20: write the next review date

An unpaid invoice becomes expensive when it has no owner and no next date. Put the matter on a calendar with:

  • owner;
  • next action;
  • response deadline;
  • escalation owner;
  • budget threshold.

Then the file moves because a date arrived, not because someone suddenly remembered it.

Bottom line

The checklist is designed to prevent two bad outcomes: spending legal money on an administrative error, and treating a serious solvency or legal problem like routine collections.

Confirm the debtor, due date, amount, evidence, law, deadlines and objective. Then choose pressure.

General commercial information only, not legal advice. Have qualified local professionals confirm legal deadlines, interest, suspension, insolvency and enforcement rights.

Related Reading

Sources and Jurisdiction Boundaries