Collecting AR from business clients who refuse to pay?

January 21, 2026

by an investor from Harvard University - Harvard Business School in Cambridge, MA, USA

I have two clients (first time this has happened in 8 years!) who basically don't want to pay their bills. Total is around $100k. Is it better to do a demand letter with a lawyer and then go via courts, or threaten collections and then go down collections route? My gut is they will pay if threatened with collections, and that is probably easier than courts. But, curious what others have done.

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Reply by a lender
in Falmouth, MA, USA

1. Final email with lawyer copied 2. Formal demand letter from attorney 3. Final warning before collections 4. Hand off to collections or file legal action

Reply by a professional
from Northwestern University in Southborough, MA, USA

Lawyers are always escalation points that are expensive on both sides, and if the client is actually refusing to pay rather than “not wanting to” then engaging with counsel is very unlikely to lead to an outcome you want. Important to figure out the underlying reason why - I had a client like this where we simply had a misunderstanding of words used in this process of collecting on amounts owed, and it led to a very expensive, drawn-out outcome due to egos and “principle.” Also, make sure you put your insurance company on notice about this, because if it goes the legal route, you want to know that your insurance company is going to pay for the defense when the eventual counter-suit comes. My recommendation is to take the client to lunch 1-1, offer to pay, and figure out the reason they don’t want to close their balance with you, do what you can to get to the outcome of them paying (even if it’s discounting the invoice - maybe by the same amount that you’d pay a lawyer anyway?), and going forward either get paid before doing the work (or providing the service / products), or drop them as a client because they’ve already shown you how they act in situations like this. Good luck!

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