How to collect unpaid invoices without damaging the customer relationship
When reminders run out, an unpaid invoice needs a plan. A 30, 60 and 90 day approach for Canadian contractors, from payment plans to small claims, that keeps the door open for future work.
An unpaid invoice becomes a collections problem once the agreed payment terms have passed and your reminders, follow-up messages and a phone call haven't produced either the money or a plan to pay it. At that point the polite request has done its job, and what's needed is a structured way to recover the balance.
Knowing how to collect unpaid invoices at this stage matters for more than the one job. Most trade businesses run on referrals and repeat customers, and a homeowner who settles a late bill on reasonable terms can still recommend you next spring. A collection handled badly costs the balance and the relationship. Handled well, it often recovers both.
Short answer To collect an unpaid invoice without damaging the relationship, first find out why it's unpaid, then move through set steps with dates attached. Offer a written payment plan around 30 days past due, send a formal final notice around day 60, and consider small claims court, a collection agency or a lawyer from day 90. Keep every exchange factual and in writing. If the money never arrives, the CRA lets you recover the GST/HST you already remitted through a bad debt adjustment.
This guide picks up after the reminders. If you're still at the stage of wording the first request or a due date reminder, start with our guide on asking politely for payment, which covers that ground in detail.
When does an unpaid invoice become a collections problem?
There's no single day when a late invoice turns into a collections file. It's a combination of signals, and the more of them you see, the sooner you should change approach.
- The due date has passed and at least two reminders have gone unanswered.
- A promised payment date has come and gone.
- The customer has raised a complaint about the work for the first time after receiving the invoice.
- Calls go to voicemail and messages are read but not answered.
One of these on its own may mean a busy week. Two or more usually mean the invoice needs a plan rather than another reminder.
Find out why the invoice is unpaid
Once you've recognised the problem, the next step is understanding it. The reason a customer hasn't paid decides which response will work, and a single conversation usually tells you which of four situations you're in.
| Reason | Sign | Response |
|---|---|---|
| Cash flow | Apologetic, asks for time | Offer a payment plan |
| Dispute | Raises the quality or scope of the work | Meet, review the quote, resolve the issue |
| Forgetful | Means to pay, keeps forgetting | Fixed date, payment link in hand |
| Unwilling | No response, or refusal | Final notice, then formal options |
The dispute row deserves particular care. A customer who believes part of the work was wrong won't respond to payment requests, however well worded. Go back to the approved quote and any change orders, look at the issue in person if you can, and fix genuine problems quickly. Settling a fair complaint and collecting the balance is usually faster than arguing about it.
How to collect unpaid invoices with a 30, 60 and 90 day plan
With the reason identified, you can put the collection on a timetable. We suggest counting from the invoice's due date and moving to the next step only if the one before it hasn't worked. The days are a guide, and a large balance may justify moving faster.
| Day | Step | Tone |
|---|---|---|
| 30 | Offer a written payment plan | Cooperative |
| 45 | First instalment due, or plan signed | Supportive |
| 60 | Send a written final notice | Firm |
| 75 | Confirm any lien deadlines | Careful |
| 90 | Choose a formal option | Formal |
Each step is explained below. Throughout, keep a dated note of every call, message and payment, because if the matter ever reaches a tribunal or a court, that history is your evidence.
Offer a payment plan at day 30
For customers short on cash, a payment plan is often the fastest route to the full balance. It gives them a manageable amount and gives you dates you can hold them to. Put it in writing, even for a modest balance, and ask the customer to sign and return it.
A payment plan agreement should cover:
- The invoice. Its number, the job it covers and the date it was issued.
- The balance. The total owing today, after any payments already received.
- The instalments. Each amount and its due date.
- How to pay. The accepted methods, such as card through the invoice link or e-transfer.
- A missed payment. What happens if an instalment is late, such as the full balance becoming due.
- Signatures. Both names and the date.
Keep the plan short. One page is enough, and a short document is more likely to be signed.
Send a written final notice at day 60
If there's still no plan, or the plan has been broken, the next step is a final notice. This is a formal letter or email, and its job is to make the consequences of non-payment clear without hostility.
The notice should state the invoice number, the work covered, the amount owing and the payments received so far. Give a firm deadline, such as ten business days, and name the specific step you'll take if the balance remains unpaid. Only name a step you're prepared to take. A threat that isn't followed through weakens every later request.
Check your lien rights by day 75
Contractors who improve a property often have lien rights under provincial construction or builders' lien legislation. A lien registered against the property can be an effective way to secure payment, but the deadlines are strict and usually run from when the work was completed or last supplied, not from the invoice date.
The rules, timelines and forms differ by province, and a missed deadline generally can't be recovered. If the balance is significant, speak to a lawyer about lien rights well before day 90 rather than after it.
The formal options at day 90
By day 90, the cooperative steps have had a fair chance. What remains are formal options, and the right one depends on the size of the balance and how much time you're willing to give it.
Small claims court. Every province has a small claims process for modest debts, with lower fees and simpler procedures than higher courts. In Ontario, Small Claims Court hears claims up to $50,000, a limit that rose from $35,000 on October 1, 2025. In British Columbia, most claims up to $5,000 go to the Civil Resolution Tribunal, and the BC Provincial Court hears small claims from $5,001 to $35,000. Other provinces set their own limits, so check yours before filing.
A demand letter from a lawyer. A letter on a lawyer's letterhead often prompts payment without any court filing. It costs a fee, but for a mid-sized balance it can be a proportionate step.
A collection agency. For smaller balances, or customers who have stopped responding entirely, an agency may be an option. Agencies keep a share of what they recover, and provinces set the rules they work under. In Ontario, for example, the province's collection agency guide says every agency must be registered, so ask about fees and registration before signing anything.
Each of these options effectively ends the working relationship. That's why the earlier steps matter. The more balances you resolve at day 30 or 60, the fewer customers you lose at day 90.
How to protect the relationship while you collect
Even at the formal stage, how you conduct yourself affects your reputation as much as the outcome does. Customers talk to neighbours, and a contractor known for fair dealing gets referred even after a difficult job.
A few principles keep a collection from turning into a feud. Keep every message about the invoice and the agreed terms, never about the customer's character. Keep the matter private. Posting about a customer's debt online can create legal problems of your own and rarely produces payment. Respond promptly when a customer does get in touch, and confirm any new arrangement in writing the same day.
What if the money never arrives?
Some balances can't be recovered, however well the process is run. When that happens, there's still the tax to consider, because you may have already remitted GST/HST on an invoice that was never paid.
The CRA allows a bad debt adjustment in this situation. If you reported and remitted the GST/HST on a credit sale and all or part of the amount becomes a bad debt, you can recover the tax on the unpaid portion. You must have dealt with the customer at arm's length, write the amount off as a bad debt in your books, and claim the adjustment on a return filed within four years of the due date of the return for the period in which you wrote it off.
The CRA's formula is the GST/HST on the sale, multiplied by the unpaid amount, divided by the total sale including tax. As an illustration, take a New Brunswick job invoiced at $4,600, which is $4,000 plus $600 of HST at 15%. The customer paid $2,300 and the remaining $2,300 proved uncollectible.
| Item | Amount |
|---|---|
| HST on the sale | $600 |
| Unpaid balance | $2,300 |
| Total sale with tax | $4,600 |
| Adjustment ($600 × $2,300 ÷ $4,600) | $300 |
If the customer later pays any part of a debt you've written off, the CRA requires you to account for the GST/HST portion of that recovery in the period you receive it. Ask your accountant to confirm how both rules apply to your filing.
How StrikeHoney supports collecting what you're owed
The steps above depend on two things. You need to know exactly which invoices are overdue, and to keep an accurate balance as payments come in. StrikeHoney keeps both in view on your phone, for every job.
- Every overdue invoice in view. Outstanding, Overdue and Collected sit on one screen, and you can tap any of them to filter. Deciding which customers need a payment plan or a final notice starts from a list rather than from memory.
- Reminders that keep going. Automatic overdue reminders chase unpaid invoices for you, so the early follow-ups happen on time without anyone remembering to send them.
- Payment plans that stay accurate. Partial payments are tracked against the invoice, and payments made by cash, cheque or e-transfer can be marked by hand, so the balance owing after each instalment is always current.
- Paying is never the obstacle. Every invoice links to a secure card payment page and carries a QR code, so a customer ready to pay can do it in a minute.
All of it is included in the one plan, priced at $24/mo CAD, or $19/mo CAD when you commit to a year. Our contractor invoicing software shows how invoices, reminders and payments connect.
The bottom line
Knowing how to collect unpaid invoices comes down to structure. Find out why the customer hasn't paid, then work through a payment plan, a final notice and the formal options on a timetable, keeping every exchange factual and in writing. Most balances are recovered in the early, cooperative steps, which is also where the relationship survives. For the ones that aren't, small claims limits, lien rights and the CRA's bad debt adjustment give you a way to recover what you can.
To see how StrikeHoney keeps overdue invoices, reminders and partial payments in one place, visit our invoicing feature page.
Collecting unpaid invoices, answered
StrikeHoney shows Outstanding, Overdue and Collected on one screen, and you can tap any of them to see exactly which invoices need attention. Automatic overdue reminders chase unpaid invoices for you, and payments made by cash, cheque or e-transfer can be marked by hand, so the balance on a payment plan stays accurate. Every feature is included for $24/mo CAD.
Treat it as a collections matter once the agreed due date has passed, your reminders have gone unanswered and a phone call hasn't produced a payment or a firm plan. For most small jobs that point arrives somewhere between two and four weeks after the due date. From then on, every step should be in writing.
Usually, yes. A customer who can't pay the full balance today will often pay it in instalments, and a written plan turns a vague promise into dates you can follow up on. Put the total owing, each amount and due date, the payment method and what happens if a payment is missed in a short signed agreement.
State the invoice number, the work it covers, the amount owing and the payments already received. Give a clear deadline, such as ten business days, and name the step you'll take if the balance isn't paid by then. Keep the tone factual, send it in writing and keep a copy.
Yes, within your province's limit. Ontario's Small Claims Court hears claims up to fifty thousand dollars. In British Columbia, most claims up to five thousand dollars go to the Civil Resolution Tribunal, and the Provincial Court hears small claims up to thirty-five thousand. Check your own province's limits and filing rules before you start.
Often, yes. If you already reported and remitted the GST/HST on the sale and the debt becomes uncollectible, the CRA lets you write it off and claim a bad debt adjustment for the tax on the unpaid portion. You must deal with the customer at arm's length and claim within four years. Ask your accountant how it applies to you.
It's an option for balances that aren't worth a court claim, or when a customer has stopped responding entirely. Agencies keep a share of what they recover, and provinces such as Ontario require them to be registered, so ask about fees and registration first. Once an agency is involved, the working relationship with that customer is usually over.
