Collecting unpaid invoices: step-by-step plan for entrepreneurs

Collecting an unpaid invoice follows a fixed sequence: first a friendly payment reminder, then a firmer formal demand (for consumers with a 14-day notice), followed by a formal demand including collection costs and interest, and only if that yields no results do you hand the claim over to a collection agency. Most invoices are paid somewhere in the first three steps — which you, as an entrepreneur, can easily take yourself. Below is the step-by-step plan outlining the correct timing, the right tone, and the moment to hand over the case.

A web designer had an outstanding invoice of €2,400 with a freelancer. A reminder after ten days, a formal demand after three weeks, a formal notice after a month — and then the money arrived, including collection costs. Total effort on their part: three emails and a phone call. That is the route below.

The short answer

1. Reminder. Friendly, shortly after the due date. Usually, the invoice has simply been forgotten.
2. Demand letter. Stronger, with a new deadline. For consumers, the mandatory 14-day letter.
3. Demand letter. Formal, with collection costs, interest, and the announcement of legal action.
4. Hand it over. If payment is not received, go to a collection agency or lawyer.
5. it yourself or outsource. You handle the first three steps yourself; you only transfer it in the event of persistent silence or a dispute.

Step 1: the payment reminder

Start off friendly. Send a payment reminder shortly after the due date — five to ten days later is customary. Assume a misunderstanding: an invoice that has been buried or accounting that is lagging behind.

• Refer to the invoice number, the amount, and the original due date.
• Give a short new deadline, for example seven days.
• Attach the invoice again as an attachment.

Tone: neutral and helpful. You want to get paid and retain the customer relationship. You do not charge fees or interest in this step yet.

Step 2: the reminder

No response? Then the tone becomes more businesslike. You send the reminder approximately two to three weeks after the due date. Here lies an important distinction between consumers and businesses.

For a consumer: the 14-day letter

Before you may charge collection costs to a consumer, you must send a demand letter that provides a payment term of at least fourteen days (starting from the day after receipt) and states the exact amount of collection costs. If the letter is incorrect, you forfeit the right to those costs. See the Debt Collection Costs Act (WIK).

At a company

For a business debtor, that mandatory 14-day letter is not a requirement. Collection costs and statutory commercial interest are generally due without a separate reminder after the payment term has expired, unless otherwise agreed. Sending a reminder is therefore primarily a means of pressure.

Step 3: the summation

The formal notice is your final independent step before transferring the case. The tone is formal and it contains a strict deadline. What it should contain:

• The claim: invoice number, principal amount and due date.
• The statutory (commercial) interest from the due date.
• The collection costs according to the WIK scale (15% on the first €2,500, minimum €40).
• A strict deadline, often five to ten working days.
• The announcement that you are handing over the claim for collection or taking legal action in the event of non-payment.

A well-substantiated formal demand often works after all: the escalating costs and the concrete threat exert pressure. The structure is included with the formal demand.

Timing and tone in brief

• Day 5-10 after expiry date: reminder, kindly.
• Weeks 2-3: formal notice, business; for consumers, the 14-day letter.
• Weeks 4-5: formal demand letter, with costs and interest.
• Next: hand it over.

Remain consistent throughout the entire process: every letter refers to the previous one, and the deadlines increase logically. Arbitrary or empty threats undermine your position.

Step 4: handing it over

If the formal demand does not work, you hand it over. This can be done to a collection agency, a bailiff, or a lawyer. Handing it over is advisable as soon as:

• the debtor remains silent or refuses after the demand;
• the claim is disputed — in case of disagreement, sending a formal demand yourself is no longer effective;
• the amount is large enough to justify proceedings;
• you yourself lack the time or the legal knowledge for the next step.

Ensure your file is in order before transferring it: order confirmation, invoice, general terms and conditions, the sent reminder, demand letter, and formal notice, and all correspondence. The more complete your preliminary work, the faster the collection agency can take action. More about the considerations when engaging a collection agency.

Honest recommendation

For an undisputed invoice where the customer is simply slow, you can easily handle the first three steps yourself. A reminder, a proper demand letter, and a clear formal notice take little time and resolve most matters — you do not need a collection agency or lawyer for that. Only hand over the case if the debtor remains silent after the formal notice, if the claim is disputed, or if it comes to litigation. With consumers, pay close attention to the 14-day notice: an error in it will cost you the right to collection costs. In case of doubt regarding the wording or a disputed claim, legal advice is worth the money.

Read more about the out-of-court process in amicable debt collection, about the cost calculation when calculating collection costs, and about the timing of transferring cases when engaging a collection agency.

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