What to Do When a Customer Won't Pay (New Zealand)

It's one of the worst feelings in business. The work is done, the invoice is well overdue, and the customer has gone quiet — or worse, is flatly refusing to pay. You're out of pocket for your time and materials, and you're not sure what your options actually are.

The good news is that in New Zealand there's a clear escalation path, and most unpaid invoices get resolved well before the serious steps. Here's what to do, in order — and how to make sure you're never in this position again.

This is general information, not legal advice. For anything significant, consider talking to a lawyer or your local Citizens Advice Bureau.

Step 1: Send a polite reminder

Start by assuming the best. People forget, invoices get buried, and life gets busy. A friendly reminder resolves a surprising number of "won't pay" situations that were really just "haven't got to it yet."

Resend the invoice, confirm it was received, and give a clear, calm nudge about the due date. Keep it in writing (email or text) so you have a record.

Step 2: Follow up firmly and in writing

If the polite nudge goes unanswered, step it up. A firmer written follow-up should:

• State the invoice number, amount, and original due date.
• Note how overdue it now is.
• Give a specific new deadline to pay by.
• Keep a professional, factual tone — no threats, no emotion.

Consistency matters here. A customer quickly learns whether you actually follow up or whether you can be ignored.

Step 3: Make a phone call

If writing isn't working, pick up the phone. A direct but calm conversation often surfaces the real issue — cash-flow trouble at their end, a misunderstanding about the work, or a dispute they hadn't raised. Sometimes you can agree a payment plan on the spot.

Whatever you agree, follow it up in writing afterwards so there's a record of what was said.

Step 4: Send a formal letter of demand

If informal contact fails, a letter of demand is the next step. This is a formal written notice stating that payment is required by a certain date, and that you'll pursue further action if it isn't paid.

It doesn't need to be written by a lawyer, though having one send it adds weight. A letter of demand signals you're serious and are prepared to escalate, which is often enough to get an otherwise stalling customer to pay.

Step 5: The Disputes Tribunal

For amounts up to $30,000, New Zealand's Disputes Tribunal is a relatively cheap, informal way to resolve the matter without lawyers. You file a claim, pay a modest fee, and both sides present their case to a referee who makes a binding decision.

To give yourself the best shot, bring your documentation: the quote, the agreed scope, proof the work was done (photos, sign-offs), the invoice, and the record of your follow-ups. This is exactly why keeping good written records throughout a job matters so much.

Step 6: Debt collection or the District Court

For larger amounts or a decision the customer still won't honour, you can engage a debt collection agency or, for bigger sums, pursue the matter through the District Court. These are more serious, more expensive steps — usually a last resort when everything else has failed.

The real lesson: prevent it up front

Every step above is about recovering money after it's already gone wrong. It's stressful, slow, and there's never a guarantee you'll see the money. The far better strategy is to structure your payments so a customer can't leave you unpaid in the first place.

That's what escrow does. Instead of doing the work and then hoping to be paid, the customer funds the payment into a protected trust account before the job is completed. You can see the money is committed and real. When the work is approved, it's released straight to your bank.

There's no invoice to chase, because the money was secured up front. If there's a genuine dispute, the funds are paused and worked through — but the money hasn't disappeared into thin air, and you're not the one chasing it.

Pair that with the habits that prevent disputes in the first place — clear written scope, deposits, milestones on big jobs, and prompt invoicing. We cover those in how to get paid on time as a tradie and how to avoid payment disputes.

The bottom line

When a customer won't pay, work the ladder calmly: polite reminder, firm follow-up, phone call, letter of demand, and the Disputes Tribunal if it comes to that. Keep everything in writing and hold onto your documentation.

But the best outcome is never needing the ladder at all. Get started with CASHBOX and hold payments in escrow, so the money's already secured before the work is done — and "the customer won't pay" stops being a sentence you ever have to say.