How an Australian business should request payment for an overdue commercial invoice

If a commercial invoice to another business is overdue, begin with firm, documented commercial follow-up (emails, calls and a written letter of demand that sets out the invoice, amount, basis for the debt and a short payment deadline). If those steps don’t work, escalate through mediation or a debt collector, and consider tribunal litigation for small claims. For a corporate debtor only, a statutory demand under the Corporations Act is a formal insolvency tool but carries strict form and timing rules — get legal advice before using it. For practical templates and stepwise guidance on letters of demand, see the federal business guidance linked below.

Explaining what to do first, and why it matters

Late payment often reflects administrative delay, not refusal to pay. A concise, polite but firm first approach protects the commercial relationship while creating a paper trail if you later need to escalate. Business.gov.au recommends documenting attempts and then sending a written demand that states the amount, invoice numbers, what was supplied, the date of the invoice and a clear date by which payment must be made; say what you will do if the debt remains unpaid (for example refer to a collector or take court action). See the official guidance for practical templates and wording: how to write a letter of demand on business.gov.au.

Practical sequence: from soft reminder to formal demand

1. Documented reminders. Call or email and follow up in writing. Record who you spoke with, the dates and what was said. This often solves matters quickly and gives you evidence if escalation becomes necessary.

2. Written letter of demand. If reminders fail, send a formal letter of demand. Include: invoice number(s), date(s), description of goods or services, the exact amount owing, a clear payment date (a short, reasonable deadline), and the next step if unpaid (mediation, referral to a collector, or court). Business.gov.au provides a step‑by‑step template and explains what to include: Write a letter of demand — business.gov.au.

3. Reasonable flexibility before legal steps. If the debtor makes a credible offer to pay by instalments or disputes a portion, consider negotiating in writing. If the dispute is genuine and substantial, mediation or a small dispute process may be quicker and cheaper than court.

Next-level options: mediation, debt collectors, and small-claims court

• Mediation / Small Business Commissioners: Many states and territories have Small Business Commissioners or similar dispute‑resolution services that can help with unpaid invoices. These services are low‑cost and preserve commercial relationships. For an example of state guidance and mediation pathways, see the Queensland Small Business Commissioner’s practical notes on unpaid invoices: Unpaid Invoices: Practical Steps — QSBC.

• Debt collection agencies: Engaging a reputable collector is a common escalation. However, collectors and creditors must follow fair‑trading, consumer protection and conduct rules; the ACCC publishes a debt‑collection guideline that explains prohibited conduct such as misleading statements about court action or aggressive behaviour. If you use a collector, confirm their approach and oversight in writing: Debt collection guideline: for collectors and creditors — ACCC.

• Small‑claims / tribunals: If the unpaid invoice falls within your state or territory’s small‑claims or tribunal monetary limit, a claim in the local tribunal or magistrates court is usually quicker and less costly than higher court litigation. Limits and procedures vary between jurisdictions — check your relevant tribunal or Small Business Commissioner guidance before filing.

Statutory demands and winding‑up: powerful but technical (company debtors only)

If the debtor is a company, a creditor may have the option of serving a statutory demand under the Corporations Act. This is not an everyday letter of demand — it is a formal insolvency tool that requires precise form, a supporting affidavit in some cases, correct service, and strict timing. The Federal Court explains the statutory‑demand / winding‑up pathway and warns about the strict requirements and risks of defective demands. Consult the court guide and the Corporations Act text before proceeding: Federal Court information on statutory demands and winding up and the consolidating legislation: Corporations Act 2001.

Important cautions: statutory demands can prompt a company to apply to set the demand aside (usually within 21 days) and mistakes can lead to orders for costs or a demand being set aside. Because thresholds and regulatory details have changed in recent years, confirm the current monetary threshold and procedural requirements before issuing a demand and obtain legal advice where appropriate.

Evidence and records that matter

When you escalate, the decision-maker (a mediator, tribunal or court) will focus on a few concrete items: the invoice(s) themselves, any signed contracts or purchase orders, delivery or completion proof (delivery dockets, acceptance emails), correspondence about disputes or approvals, and records of attempts to recover (emails, call logs, copies of demand letters). Keep this material organised and time‑stamped: a clear paper trail often decides these disputes.

A brief, adaptable demand-letter structure (illustrative)

• Opening: identify your business, the debtor, and the invoice number(s) and date(s).
• Claim: state the exact amount owing and why (goods/services supplied).
• Deadline: set a clear payment date (for example, 7–14 days from the letter), and give bank details for payment.
• Consequences: state the next step if unpaid (mediation, debt collector, tribunal or, for company debtors, possible statutory demand) — avoid threatening unlawful or misleading actions.

For practical wording and examples, use the federal template guidance: Write a letter of demand — business.gov.au.

When to get professional advice

Seek a lawyer before issuing a statutory demand or starting winding‑up steps, and where the debtor disputes the claim, alleges offsets, or the debt involves complex contract or security issues. Also consider legal or accounting help if the amount is large or time sensitive. ASIC’s small‑business debt recovery page summarises practical steps and cautions for small businesses considering escalation: Debt recovery for small business — ASIC.

If you prefer a professionally prepared demand letter drafted from your information, consider a document service that prepares dispute letters for businesses — for example, can prepare a demand letter from details you supply. Remember that such services do not provide legal representation; you remain responsible for deciding whether and how to send the document.

A final practical note

Begin with clear, documented communication. Escalation often succeeds only when it’s proportionate: mediation or a tribunal claim will usually cost less than full court proceedings, and a statutory demand is a significant legal step that requires precision. Keep evidence organised, follow the official templates and guidelines linked above, and obtain specialist advice for technical or high‑value disputes.

For help preparing a professional dispute document, BeforeSuit can help you prepare your next steps.