What to do when a customer won't pay

Q: What can I do if a client won't pay my invoice in NZ?

Send a written reminder, then call, then send a formal letter of demand with a firm deadline. If that fails, the Disputes Tribunal hears claims up to $60,000 without lawyers. For construction work, a payment claim under the Construction Contracts Act is usually the strongest step.

Q: Can I charge interest on a late invoice in New Zealand?

You can charge interest on overdue invoices only if your agreed terms provide for it and the customer accepted those terms before the work. Around 1.5% to 2% per month is common. Interest that was never agreed in advance is not enforceable.

Q: How much can the Disputes Tribunal award in New Zealand?

The Disputes Tribunal can hear claims up to $60,000, increased from $30,000 on 24 January 2026. A single dispute cannot be split into multiple claims to fit within the limit.

Q: How long do I have to chase an unpaid invoice?

Under the Limitation Act 2010 you generally have six years from the date the debt fell due to bring a claim. In practice the chances of recovery drop sharply after the first couple of months.

Q: What is a letter of demand?

A letter of demand is a formal written request for payment setting out the work, the amount owed, the fact it is overdue, a deadline, and the consequences of non-payment. No lawyer is required to send one.

Q: Should I stop work if I haven't been paid?

Check your contract before stopping work, as suspending without the right to do so can be a breach. Under the Construction Contracts Act, a payee who has issued a valid payment claim and been neither paid nor given a payment schedule can suspend work after five working days written notice.

Last updated 10 September 2026

Most late payment isn't refusal. It's an invoice sitting in an inbox behind forty others, or a bank transfer someone meant to do on Sunday. The handful that are genuine refusals are much easier to deal with if you did a few boring things at the start.

Before the job: make it hard to go wrong

Quote in writing, every time. A quote a customer has accepted is the clearest evidence there is of what was agreed and for how much. Verbal agreements are enforceable in New Zealand, but proving one is a different matter.
Take a deposit on anything substantial. If you're buying materials, ask for enough to cover them. A customer who has paid something is far more likely to pay the rest, and you're not funding their job out of your own account.
Say when payment is due, on the invoice. “Due on receipt” is vague enough to be ignored. A real date gets diarised.
Have terms of trade, and get them agreed. One page is enough: payment terms, interest on overdue amounts, who pays recovery costs, and when ownership of materials passes. It has to be accepted before the work — terms that first appear on the invoice are terms nobody agreed to.

The first two weeks

Chase early and without drama. The day after the due date, a short note that the invoice is now overdue is enough — no apology, no essay. Then every few days.

Keep it in writing rather than by phone, not because you expect trouble, but because if it ever does become trouble you'll want the trail. A polite email thread is a complete record of you asking reasonably and them not answering.

When it's genuinely overdue

Ring them. One call resolves a surprising number of these. Follow it up in writing with what you agreed.
Send a formal letter of demand. Set out what the work was, what's owed, that it's overdue, and a firm date by which you need it. Say what you'll do next. This is often the point at which people pay — it signals the next step is real. You do not need a lawyer to write one.
Stop working for them. Obvious, easily forgotten when you're busy and they're a regular. Check your contract first — see the note on suspension below.

Charging interest, and when you actually can

You can charge interest on an overdue invoice only if your terms provide for it and the customer agreed to those terms before the work started. A rate between 1.5% and 2% a month is common and generally holds up.

Interest that appears for the first time on the invoice, or in an angry email afterwards, is not enforceable — the customer never agreed to it. This is the entire reason to have a one-page terms of trade accepted at quote stage. In practice interest matters less as revenue than as leverage: it gives the conversation a cost that grows.

If it's construction work, read this first

The Construction Contracts Act 2002 gives people doing building and construction work — including most trades, and including residential jobs — a much stronger route than ordinary debt chasing, and most sole traders have never heard of it.

If you issue a valid payment claim and the payer does not respond with a payment schedule within 20 working days (or the shorter period your contract sets), they become liable for the full claimed amount. Not the amount they think is fair — the amount you claimed. You can then recover it as a debt, and you can suspend work after five working days' written notice.

The catch is that a payment claim has to say specific things to be valid, including that it is made under the Act and, for residential work, being accompanied by the prescribed explanatory information. Getting the format right once and reusing it is worth an hour with a lawyer or your trade association, because a defective claim gets you none of this.

The Disputes Tribunal

For small business debts this is the realistic next step, not a lawyer. It's designed for people to use without one — lawyers aren't allowed to represent you there, the filing fee is modest, and a referee hears both sides informally.

As of 24 January 2026 the Tribunal can hear claims up to $60,000, doubled from the previous $30,000 limit. You can't split one dispute into several claims to fit under the cap — if you're owed more, you either give up the difference or go to the District Court instead.

Bring your quote, your invoice, and the emails. A tidy paper trail is most of the case. A referee deciding between a tradie with dated records and a customer with a recollection is not a difficult decision.

If the customer is a company

Check the Companies Register before you spend money chasing. A company in liquidation is not going to pay you, and knowing that early saves the filing fee. If the company is solvent but stalling, a statutory demand under the Companies Act is a heavier instrument than a Tribunal claim and gets attention quickly — but it is genuinely legal territory and the wrong circumstances make it an abuse of process. Take advice before using it.

Knowing when to stop

A day preparing a Tribunal claim over $400 is a day not earning. Sometimes the right answer is to write it off, stop taking their calls, and put the deposit rule in place so it can't happen the same way twice. That's not losing — it's pricing the lesson.

A bad debt you have genuinely written off is deductible for income tax, and if you filed on the invoice basis you can usually claim back the GST you already paid on it. Tell your accountant rather than quietly absorbing it.

Common questions

What can I do if a client won't pay my invoice in NZ?

Work through it in order: a written reminder, a phone call, a formal letter of demand with a deadline, and then the Disputes Tribunal for claims up to $60,000. If it is construction work, a payment claim under the Construction Contracts Act is usually the strongest step and comes earlier. Most invoices are paid at the letter of demand stage.

Can I charge interest on a late invoice in New Zealand?

Only if your terms say so, and only if the customer agreed to those terms before the work — on the quote or in your terms of trade, not for the first time on the invoice itself. A rate of 1.5% to 2% a month is common and generally enforceable. Adding interest that was never agreed will not survive a challenge.

How much can the Disputes Tribunal award in New Zealand?

Up to $60,000 since 24 January 2026, doubled from the previous $30,000 limit. You cannot split one dispute into several claims to fit under the cap — if you are owed more, you either give up the difference or go to the District Court.

How long do I have to chase an unpaid invoice?

Six years from the date the debt became due, under the Limitation Act 2010. That is a long stop, not a plan — evidence gets thin, businesses close, and people move. The realistic window in which chasing works is the first two months.

What is a letter of demand?

A short, formal letter setting out the work, the amount owed, that it is overdue, a firm date by which you need payment, and what you will do if it does not arrive. It is not a legal document and you do not need a lawyer to write one. It is the point at which a lot of people pay, because it signals that the next step is real.

Should I stop work if I haven't been paid?

Often yes, but check your contract first — stopping without a right to do so can put you in breach. Under the Construction Contracts Act, if you have issued a valid payment claim and received neither a payment schedule nor payment, you can suspend work after giving five working days' written notice.

Make the first part automatic

PayMint sends quotes your customer accepts online, lets you ask for a deposit up front, marks invoices overdue on their due date, and chases them for you every few days until they're paid — so the boring part happens whether or not you remember, and the paper trail builds itself. 1% per paid invoice (plus Stripe's card fee), no monthly cost.

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Related guides

General information, not legal advice — the Construction Contracts Act and statutory demands in particular have requirements this page does not cover. For your specific situation, talk to a lawyer or check disputestribunal.govt.nz.