Past due invoice? Law firm tips for handling non-paying clients

Every unpaid invoice is more than an inconvenience—it’s lost revenue that can strain your firm’s cash flow, disrupt operations, and make it harder to build a profitable practice.

Unfortunately, struggling to collect on-time payments is more common than you may think. According to the 2025 Legal Industry Report, 68% of law firms cited fee collection as a moderate or significant hurdle. 

While there are certainly a small fraction of clients who simply never intended to pay in the first place, the vast majority of billing and invoice delays are the result of common, and far less malicious, problems—problems that can be proactively addressed.

In this article, we’ll give you expert tips for handling non-paying clients, including how to create transparent fee agreements, communication and escalations tips, and advice for implementing technology that will help you get paid faster and more consistently.

How to prevent client non-payment before it starts 

Once a client decides not to pay you or is not financially stable enough to pay you, there’s not a lot you can do to recover the funds after the fact. Instead, it’s vital to proactively address common client vetting failures or areas where miscommunication can happen—that way, you can avoid situations that lead to non-paying clients in the first place.  

It’s also worth noting that when clients don’t pay for an invoice, they’re not always completely at fault. When law firms cling to outdated billing processes, have unclear invoices, or don’t make their fee structures transparent, it can cause significant delays—even when clients fully intend to pay.

Below are some key areas you can address to prevent late payments at your firm.

Implement a red-flag checklist

Having a steady flow of new clients is essential for growth, especially for new law firms. However, failing to vet a client properly during the intake process can have dire consequences down the line. 

Listen for any obvious red flags during your initial consultation, such as clients who say they’ve used multiple attorneys before coming to you or clients who attempt to negotiate or ask about rates before discussing the particulars of their case. Also, be on the lookout for anyone who seems unwilling to sign basic attorney fee agreements and other documents.

Google and other search engines can also be your friend for basic client vetting. For new clients, it can’t hurt to do a quick general search of their name to see if anything unusual comes up. You could also search through a list of prior litigation in your jurisdiction.

Last but not least, consider asking clients directly about their ability to pay your legal fees as part of your intake process. Many clients will be upfront with their concerns if asked.

Set clear payment expectations and billing cadence at intake

Before a client signs any paperwork, clearly communicate the how, when, and why of payments and invoicing at your firm. Make sure to explain key aspects, such as:

• How you bill (e.g., hourly, flat rates, contingency, etc.) 

• What constitutes billable hours (e.g., what kind of communications will be billed)

• If you take a retainer and how it works

• How often you invoice and when payments are due

• If you charge late fees or interest

• Payment options (including any online payment methods)

This should, of course, be backed up by a formal fee agreement (more on that below), but communicating a client’s financial obligations in plain language offers another chance to answer common questions, set up legal fee financing or other alternative payment structure, and clear up any confusion. 

Use a written fee/retainer agreement as your first line of defense

Once you and a new client have discussed the financial details, it’s time to put that agreement in writing. This will formalize any payment terms and fee structures, and provide you and the client with one last chance to get on the same page. Once an agreement is signed, it also acts as an important tool should any billing disputes arise, as you can always refer back to the terms of the agreement.

Make sure your written fee agreements are valid and easily understood. The goal is not to trick a client into signing something they don’t understand—quite the opposite, a client should fully comprehend, making any non-compliance even easier to address.

In addition to signed documents, having an evergreen retainer or other form of upfront payment is also a good way to establish if a client is serious about being able to pay. If you take a retainer, using a secure document portal is a good way to speed up document signing and payments by combining them into a single process.

Offer convenient payment options

Assuming a client is happy with your representation and service, there are a few other common hurdles that frequently lead to non-payment:

1. Outdated invoicing methods: When firms rely on paper invoices and inconvenient payment methods, clients may delay paying an invoice. There’s also a higher risk of paper bills getting lost amongst mountains of spam mail.

2. Inconvenient payment methods: Firms that only accept paper checks or bank transfers risk slowing down the payment process. Today’s clients want to use their preferred payment method.

3. Inability to pay a lump sum: Even vetted clients sometimes run into cash flow problems and cannot pay a bill when it’s invoiced as a single, large payment.

Offer various convenient payment options to create a more client-centered experience and get paid faster. Offering online payment methods like credit cards and e-checks through a secure payment portal can make processing payments significantly easier for both you and your clients. 

You can also set up legal fee financing or payment plans to help clients pay for legal services over time. Remember, getting paid in installments may not be ideal, but it’s infinitely better than not being paid at all.

Using a legal billing solution for your payments will ensure that you can offer frictionless payments while still maintaining IOLTA compliance. Additionally, legal payment software will make managing any fee structures or unique billing arrangements easier.

Communicating to avoid non-payment (and reduce friction)

When a client doesn’t pay an invoice, it’s an uncomfortable situation for everyone involved. However, clear communication can go a long way in preventing these awkward situations from arising in the first place.

Let’s go over some communication tips for handling non-paying clients.

Send descriptive, easy-to-understand invoices 

Legal bills can be expensive, and one common friction point in the payment process can be when clients don’t understand the breakdown of an invoice. To create an effective legal invoice, use consistent, simple language to avoid confusion about what work was done and when.

You don’t have to outline your time to the minute—your objective is to give the client a transparent view into what you’re doing for them. Use separate line items for the larger tasks and include a brief summary of your work. Be detailed but avoid legal jargon as much as possible. 

Time tracking software can make creating these invoices easier by automating the tracking of certain tasks and giving you reminders for others. The more detailed your records are, the easier it will be to defend yourself if a client contests a charge in the future.

Keep your invoicing timely (and notify clients on low retainers)

Establish when the client would prefer to receive their invoices as part of your intake process. Their timing for paying you will likely be directly impacted by when they get paid for work or other factors. By establishing a consistent invoicing schedule upfront, there’s less chance that a legal bill will take them off guard since they can budget for it properly.

Sometimes you might find yourself in a holding pattern due to circumstances outside your or your client’s control, so you won’t have anything to bill for a while. In those situations, whenever possible, you should still send some sort of note to let your client know their case hasn’t fallen by the wayside. It’s a small gesture, but it shows your client you appreciate their situation. When a client feels appreciated, they’re less inclined to be oppositional when it comes to payment.

Document communications and agreements

As an attorney, you want to assume the best of your clients—and while it’s good to give a client the benefit of the doubt, you also have to remember that your relationship is a professional one first and foremost. Any and all communications should be documented, especially when they relate to payments or billable work being performed. 

Documenting your communications isn’t meant to act as a “gotcha” for clients — it is a simple way to ensure you’re both on the same page. You might even find that you failed to communicate something to the client and have a chance to de-escalate the situation before it gets ugly. 

Using a secure client portal and case management software can be extremely beneficial for this purpose, as it will consolidate all communications and documents in one place for quick retrieval when needed.

Tips for handling clients who haven’t paid (and escalation paths)

Client non-payment will happen at some point, and having a consistent plan for follow-ups and escalation can help you keep your head and nip most non-payment problems in the bud. 

Below, we’ll review what to do when clients don’t pay.

Utilize a reminder sequence (1-day, 10-day, 30-day) 

It’s worth repeating that most non-paying clients don’t have a nefarious reason for not paying immediately. They could have seen the invoice and forgotten about it, missed the initial message entirely, or want to pay the invoice but can’t find it. 

If you escalate to a formal demand letter too soon, many clients will feel like you don’t trust them or that all you care about is their money (worse, it might run afoul of ethics rules). Instead, before escalating the situation, set up a reminder sequence that starts with the first invoice and extends out 30 days.

Here’s a quick example of a sequence for an invoice that is due 30 days after delivery:

• Day of: Send out your invoice with a polite message that clearly states the due date and the available methods of payment. Encourage clients to follow up with your team if they have any questions.

• 1-day reminder: Assuming you offer convenient, digital payment methods, most clients will pay right away. However, there is a chance you caught your client at a bad time, so a polite, next-day follow-up can’t hurt. Seeing as this message is being sent just 1 day after, there’s no need to be as detailed in this message, just highlight how easy it is to pay.

• 10-day: As the due date for the invoice approaches, give clients a warning that their invoice due date is approaching. Personalize the subject line of your messages to make the timing clear (e.g., instead of “Your invoice is due soon,” use “Your invoice is due in 15 days”) 

• 30-day: Once the invoice is due or past due, send out a final reminder informing the client that their invoice is due and what will happen if they don’t pay. This could also be a good chance ot explain that you will be stopping work and holding off any any deliverables until payment is delivered (if applicable to your case). 

You’ll also want to send a message when payment is received so clients have a receipt for their records. The easiest way to set up an email sequence is in your case management software, as it can automate this process by pulling out invoice and client details directly from the system.

Send a formal demand letter (tone, deadline, next steps)

If your automated reminder sequence doesn’t achieve the results you hoped for, it will be time to escalate to a formal demand letter. This letter officially informs a client that a payment is past due, gives a non-paying client a chance to set up a payment plan, or acts as the first step in taking legal action to reclaim unpaid legal fees.

A demand letter should include:

• Client’s full legal name and law firm information (mailing address, etc.)

• The total amount owed, along with any additional fees or interest

• The due date of the original invoice

• Any previous communication dates and additional context

• Response deadline

• Next steps (what will happen if you don’t receive a response)

Remember, this is a formal communication, and the tone should be clear and professional, not aggressive. In some cases, you may have a chance to salvage the situation and work together with the client on a solution.

Legal action for non-paying clients

In the majority of cases, a client will be ready to pay or set up some type of payment plan before escalating further—but not always. If a client is unresponsive or firmly refuses to pay, you may need to take legal action or work with a collection agency to try to recover your fees.

There are a few common avenues available for law firms if clients refuse to pay their bill:

• Small claims court: This will be the first step for most law firms. If you take a client to small claims court, you’ll need to prove that your client breached the payment contract. The judge will award the full amount due. However, it’s worth noting that there is a maximum on small claims that varies by state.

• Civil lawsuit: This option is generally reserved for clients who owe large sums that exceed what can be awarded in small claims court. Civil lawsuits will not go to trial in most cases, especially if you were good about documenting your communications. 

• Collection agency: Your final option is to use a collection agency. This is a first resort before taking legal action or a last resort when other options have failed. These agencies specialize in collecting money (usually at the cost of a contingency fee).

Unfortunately, there are also cases where the necessary effort to recover your fees outweighs the debt itself. In those cases, the best you can do is reflect on the client and the events leading up to the non-payment and try to improve your intake and other processes in the future.

Ethics and professionalism when dealing with non-paying clients

As you set up client non-payment processes at your law firm, knowing the ethical rules surrounding these situations is key. These are a few important things to keep in mind:

• It is not unethical to withdraw representation for non-payment: As long as you’ve given a client adequate warning and gone through all appropriate escalation steps, it is not considered a breach of ethics to withdraw representation of a client.

• Aggressive tactics could be a breach of ethics rules: If you are overly aggressive with your timeline or tactics to get paid, it could be considered a breach of ethics rules. This is why it’s important to have consistent processes and language when dealing with overdue payments.

• Written documentation is essential: You cannot withdraw from representation or pursue legal action to collect fees if you don’t have documentation of your fee agreement.  

• Use licensed collection agencies: Debt collection rules vary considerably from state to state. Before engaging a collection agency, ensure it is accredited and has a good reputation to avoid ethical issues later.

Learn and improve after every non-payment case

The most important thing your law firm can do after handling a non-paying client is to learn from it and make appropriate changes. Don’t assume that a client not paying their bill was just bad luck—there are likely crucial steps you missed during intake or communication that led to the situation arising in the first place.

• Client intake: 

  • What were the early opportunities to avoid miscommunications or screen out bad clients?  

  • Did you adequately screen clients for their ability to pay? Were any red flags ignored?

  • Are there explicit questions about payment on your intake forms?

  • Did you send out a clear communication about payment methods in addition to any formal documents? Are these chances to make your payment terms more straightforward?

  • Do you ask for any type of deposit or upfront payment?

• Communication and invoices: 

  • Once the case was underway, were there parts of your invoicing and follow-up process that could be improved?

  • Do you have standard communications set up for billing follow-ups? Are there ways you could make the language clearer (e.g., adding specific dates)

  • How many reminders did you send to your non-paying client?

  • Are your invoices clear and make it easy to understand what is being billed for and when the work was done? 

• Payment processes and fee structures: 

  • Are your bills easy to pay, and do you offer client-centric pricing?

  • Do you offer digital invoices and payments? If not, how long does it take you to prepare and send an invoice?

  • Would offering any incentives have encouraged faster client payment (e.g., offering a small discount for paying within the first week)? 

  • Do you give clients the option to schedule payments in advance?

  • What kind of legal fee financing do you offer? Would having this option have helped recover a payment without conflict? 

• Analytics: 

  • Using the reporting and analytics tools on your case management software, are there any common patterns you can spot?

  • Are payment times faster when clients use certain payment methods over others? 

  • Were there any common responses on your intake forms that correlated with non-paying clients?

  • If you offer them, what percentage of your clients choose to use pay later options over lump sum payments?

  • Are there any communications that are particularly effective (or ineffective) for getting clients to pay? 

Obviously, this is just a small list of questions to ask yourself after a client doesn’t pay. But by revisiting your intake, communication, and payment processes with a data-driven mindset, you may find gaps you didn’t realize were there.

Another critical point to consider is how using legal payment software could speed up certain tasks or prevent these gaps from forming in the first place. Many law firms hesitate to create communication workflows or offer alternative fee structures because they don’t have the manpower or think it will add complexity to their day-to-day. 

This is not the case. Many legal payment solutions come with built-in methods to automate invoice creation and payment follow-ups, as well as simplified ways to set up and manage a wide range of fee structures. 

Reduce client non-payment with 8am™ LawPay legal payment software

Dealing with a client not paying an invoice is unfortunate, but likely inevitable. However, by recognizing the most common friction points in the legal billing process that lead to delays in the first place, you can not only improve the overall client experience but also prevent the majority of non-payment from ever happening. 

A legally compliant digital payment solution can greatly improve your payment and accounts receivable processes. That’s why thousands of law firms around the country trust 8am LawPay’s industry-leading payment management software.

By modernizing their payments and accounts receivable processes with LawPay, firms can:

• Offer convenient online payment options

• Allow clients to pay later through legal fee financing

• Schedule payments to fit with a client’s schedule

• Simplify billing and create transparent invoices

Sign up for LawPay today to start saving time or schedule a demo to see it in action firsthand.

Schedule a demo to see what LawPay can offer your firm.

Book Now