Quick Overview:
If a client doesn’t pay your invoice, follow these steps:
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Send a reminder or demand for payment,
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send a pre-lawsuit demand,
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file a lawsuit or apply for a payment order,
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once the court has issued a decision , you can initiate enforcement proceedings,
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if the debtor is in bankruptcy, file a claim in the insolvency proceedings.
If you need help collecting a debt, we will prepare a pre-lawsuit demand for you or file a lawsuit.
Prevention Through a Written Contract
Whether you sell goods or provide services under a sales contract, a contract for work, or a cooperation agreement, it is important to clearly agree on payment terms with your client. Small business owners, in particular, often fail to enter into written contracts or require any confirmation of the service agreement or even the delivery of goods.
By taking this approach, they themselves create the conditions for the customer to fail to pay the issued invoice. A clearly drafted written contract —or at least a summary of the payment terms in a written order—will help prevent disputes or other problems. Payment terms may also be set forth in the terms and conditions to which the contract refers.
We recommend settingthe due date for payment or compensation as both a fixed date and the fulfillment of a specific condition, such as the completion of a home renovation. It may also be advisable for the client to negotiate the option to withhold payment of the invoice—or a portion thereof—if the work performed is defective.
However, the due date for payment should not be left solely to the contractor’s discretion, who would simply state it on the issued invoice regardless of the status of their performance.
It is also advisable to thoroughly vet clients and business partners; if any risks are identified, you should require stricter terms regarding payments and guarantees.
If you want to draft or review a contract in accordance with the new Civil Code (NOZ) to ensure that the payment terms are set correctly, please review our selection of business contracts.
Advance Invoices
Advance payments are a suitable solution for preventing poor payment behavior by customers. The terms of advance payments should again be specified in a written contract. The start of work or deliveries may thus be contingent upon payment of the advance.
It is important to note that even if a customer fails to pay an invoice, you are still required to remit value-added tax to the government. In some cases, however, it is possible to adjust the tax later, such as in the case of uncollectible receivables.
This is another reason why it is advisable to receive an advance payment first, so that, in the event of poor payment behavior, at least all necessary expenses related to the contract are covered.
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To ensure that the debtor takes your pre-lawsuit demand seriously, it’s in your best interest to have our attorney send it to them. In addition, we can assess your situation and your chances of success. We’ll also file a lawsuit on your behalf and represent you in court.
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Check Out Your Client
It’s worth checking out your potential client in advance. You can do this simply by searching for them online or on social media platforms where people in your industry gather. If they have a history of non-payment, it would likely already have come to light this way.
It’s definitely worth checking the Trade License Register or the Commercial Register as well, and, if applicable, finding out whether they have permanent residence registered at a municipal office, which could indicate debt problems. Next, check the insolvency registry or the central registry of enforcement proceedings; if you find the client listed there, think very carefully before working with them.
Collecting an Unpaid Invoice
First, simply send a reminder
If, despite a well-drafted contract, a customer fails to pay an invoice, you need to address the situation as soon as possible. It may simply be a mistake in the payment order, which the customer might not notice right away without your reminder.
However, if the customer is experiencing financial difficulties, delaying collection could result in the invoice remaining unpaid, forcing you to write offthe debt.
In any case, it is advisable to notify the client as soon as possible that the invoice has not been paid. If the payment is only a few days overdue, a reminder by phone or email will usually suffice.
Tip: It’s a good idea to address unpaid invoices as soon as they become overdue. Invoicing tools, such as Vyfakturuj.cz, can help you keep track of due dates by automatically sending reminders for unpaid invoices.
A pre-lawsuit demand follows
If the debtor still fails to pay the amount owed, it is advisable to issue a pre-litigation demand and threaten legal action. Even if the payment terms were subject to a confidentiality agreement, disclosing this information to your attorney or the court cannot be considered a breach of the confidentiality agreement.
In practice, we often see that many debtors pay only after receiving the first formal demand from a lawyer. The mere involvement of a lawyer can increase the likelihood of voluntary debt repayment.
The pre-lawsuit demand must be sent at least 7 days before filing a lawsuit. It should clearly state both parties—that is, you and the debtor—the amount of the debt, the circumstances under which the debt arose, a demand for payment, and information that you plan to pursue the claim in court. Finally, of course, it must include the date and your signature.
If you’re unsure how to properly draft the demand, we can prepare a pre-lawsuit demand for you that meets legal requirements and increases the likelihood of the debt being paid.
Ultimately, it comes down to filing a lawsuit and going to court
If, despite all efforts and reminders, the debtor fails to pay the debt, there will be no other option but to seek payment of the amount owed through a lawsuit in court. For the sake of completeness, we would like to add that a written demand for payment is a prerequisite for the court to award you the costs of the legal proceedings if you are successful in the dispute.
Only after a successful lawsuit will it be possible to enforce the claim through debt collection proceedings and proceed with the sale of the debtor’s assets.
The most common mistake we see creditors make is waiting too long. If the debt is not addressed in a timely manner, the debtor may end up in bankruptcy, and the chances of recovery decrease significantly.
Tip for article
Tip: Collecting a debt through our service will generally ensure a faster, more efficient, and significantly less expensive solution. You’ll save yourself weeks or months of requests and payment reminders, and you’ll usually avoid the costs of a costly legal proceeding as well.
The complaint must include the following information:
- the court to which the complaint is addressed
- the parties to the proceedings—you and the debtor, or your legal representatives
- the title of the complaint
- a description of the relevant facts
- a list of your evidence
- Proposed remedy, i.e., what decision you are seeking
- Date and signature
It is common practice to resolve the matter out of court, in which case the court issues a payment order to the debtor. However, if the complaint is ambiguous, the case proceeds to court.
We can draft a complaint for you, file a motion for a payment order, and represent you throughout the entire court proceedings.
Don’t forget about the possibility of insolvency
In the event of a customer’s payment problems, it is important not only to actively pursue the debt but also to regularly check the insolvency registry.
If a customer becomes insolvent, the Insolvency Act sets relatively short deadlines for filing claims in insolvency proceedings.
If a claim is not filed, it would not be possible to satisfy the claim, and in some cases, you would no longer be able to collect it.
Publish the Debtor’s Information
If a legal entity owes you money, you can list it as a debtor on various websites where, for example, reviews of individuals or companies are posted.
Another good option is to list them in the Central Debtors Registry. In this case, however, you must be certain that you are within your rights, and you should inform the debtor of this step.
Why Not Just Let It Go
It might only be a few hundred, and you might feel that this hassle isn’t worth it. But if everyone thinks this way, the debtor will never see justice, and eventually, a perception will take hold in society that invoices don’t actually have to be paid because nothing will happen.
Moreover, if this situation were to happen to you several times, it would no longer be just a few hundred, but amounts large enough to put you in financial trouble. That’s why you should never let yourself be cheated and should always strive to reach a fair resolution.
Tip for article
Does someone owe you money and show no intention of paying it back? Does the prospect of a lengthy court case discourage you from collecting it? A payment order could be the solution for you—it can help you get your money back quickly and efficiently.
Summary
If a client fails to pay an invoice, it is advisable to proceed systematically: first, review the contract and the due date; then send a reminder or demand for payment, and, if necessary, a pre-litigation notice. If the debtor does not respond, you can file a lawsuit or apply for a payment order, and once a decision is issued, initiate enforcement proceedings. If the debtor is insolvent, you must file a claim in the insolvency proceedings within the prescribed time limit. It is important to act promptly, as delays can reduce the chances of successfully recovering the debt. A systematic approach and properly prepared legal steps significantly increase the likelihood that the creditor will be able to recover the money.
