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Getting Paid As A Business Owner and How a Legal Contract Can Help

contracts Feb 12, 2021

You did the work.  Now your client is not paying.  What are you supposed to do?

You want to preserve the relationship and not be too confrontational but not getting paid is an issue for your cash flow and the financial stability of your business.

Here are some tips for collecting accounts receivable now outstanding, and improving the situation in the future:

Check the Contract

While legal contracts can help you to set clear expectations with your clients up front, they are also super helpful in a situation where your clients are not paying you.

Having a binding legal contract means that you can ENFORCE the terms of the contract.  So the first thing to check is to see what the contract says in regard to fees and payment terms.

Are the fees due clear in your client contract? Your client contract should state how fees will be calculated whether they are hourly, daily or fixed fees based on certain project stages.  Have you added on amounts for additional work beyond what was originally agree to?  

What about payment terms? Have you provided that interest will be charged on overdue accounts?  If you have been clear about these items, it will help you when you add interest to the invoice.  You can waive these overdue fees at your discretion, but if the contract does not have them mentioned, it is hard to add them later.

Should you require a deposit, interim payments at certain milestones, or a credit check?  Getting the money upfront is the surest way to get paid.  Ask others in your industry whether deposits or retainers are common place.  State whether the deposit is non-refundable so this is clear.

Follow Up

It is best to have an established practice for following up with clients regarding their overdue accounts. The invoice may have been forgotten, misplaced or sent to an old address. A follow-up phone call may be uncomfortable but is a good way to find out if the client is having cash flow problems or has some other reason why they haven’t paid.

Demand Letter

A lawyer can send your client a scary letter indicating why the debt is owed and when it should have been paid. It will usually state that further action will be taken if the account is not paid by a certain date. This will have some success with certain types of clients.

Having a clear legal contract to reference in your demand letter will be a great help.  


You can start a claim to sue for the outstanding amount. 

If you have a clear legal contract signed by your business and your client, this will be very important evidence in the case that you need to go to court.  If you only have an oral contract, the process of proving what was agreed to gets much more difficult.

The maximum amount of a claim in Nova Scotia Small Claims Court is $25,000 (not including interest) and the procedures are intended to be less formal and more accessible to self-represented parties (without a lawyer). You can find out more about this court here.

For larger claims, you can start a claim in Supreme Court, but you will likely need a lawyer. You should get an idea of the costs and time that will be required before starting such an action.

If you are successful in establishing your claim in court, you will be awarded a judgment against the party which you will then need to enforce.


Perhaps contrary to popular belief, being successful in court does not necessary mean you will end up with your money. The debtor is not required to hand over the cash or write you a certified cheque before they leave the courtroom. You will likely have to enforce the judgment (order) through the enforcement process. Modes of recovery may include garnishee of wages, seizure of bank accounts, third party demands, seizure of shares, personal property or seizure and sale of real property (land).

As with many things, an ounce of prevention is worth a pound of cure. Once you get to the point of having to collect your client’s money through the legal process, you have ruined your relationship with them and lost a client.

Make it Easy to Get Paid

My recommendation is to put in place a process to get deposits where possible.  Also think about ways that you can make it easy for your client's to pay you.  Don't make online businesses send you a cheque!  Also have a system for regular follow up on outstanding accounts.


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