A Canadian freelancer waiting 60+ days on a $5,000 invoice is not just an inconvenience — it is a cash flow problem. Most late-payment situations can be resolved before involving lawyers or collections, using a clear escalation process.
Prevention: The Best Way to Handle Late Payments
The most effective approach to late payments is prevention:
- Require a deposit before starting work. A 25–50% upfront payment filters out unreliable clients and ensures you are never owed the full amount before you have delivered anything.
- Include payment terms in your contract and on every invoice. If your terms are not in writing before work begins, you have less legal standing to enforce them.
- Invoice immediately on delivery. Every day you delay sending your invoice is a day added to your payment timeline.
- Make payment easy. Include clear Interac e-Transfer instructions for Canadian clients and Wise details for international clients. Friction in the payment process causes delays.
When an Invoice Is Overdue: A Step-by-Step Process
Day 1 After Due Date: Polite Reminder
Send a short, professional email — not a phone call. Many overdue invoices are genuinely forgotten. A light touch first:
Subject: Invoice #[number] — Payment Due [date]
Hi [Name], just a quick follow-up on Invoice #[number] for $[amount], which was due on [date]. Please let me know if you have any questions or if there is anything I can do to help process it. Thank you.
Day 7 After Due Date: Second Reminder
If no response or payment in the first 7 days, send a firmer follow-up. Reference the original reminder:
Subject: Invoice #[number] — 7 Days Overdue
Hi [Name], I am following up again on Invoice #[number] for $[amount], now 7 days overdue. Could you please confirm when payment will be processed? I am happy to discuss if there are any issues on your end.
Day 14 After Due Date: Phone Call + Late Fee Notice
Call the client directly. If your contract includes a late payment fee (typically 1.5% per month), notify them in writing that it has begun to accrue:
Subject: Invoice #[number] — Late Fee Now Accruing
Hi [Name], as of [date], Invoice #[number] is now 14 days overdue. Per our agreement, a late payment fee of 1.5% per month is now accruing on the outstanding balance of $[amount]. Please arrange payment within the next 5 business days. If you are experiencing cash flow difficulties, please contact me to discuss a payment arrangement.
Day 30 After Due Date: Formal Demand Letter
If still unpaid after 30 days, send a formal demand letter by email and certified mail. State the total owed (including accrued late fees), demand payment within 10 business days, and indicate that you will pursue further action if payment is not received. Keep a copy of all correspondence.
Beyond 30 Days: Escalation Options
At this stage, you have several options depending on the amount:
- Small claims court: For amounts up to the provincial limit (typically $20,000–$35,000 depending on province), small claims court is relatively simple and inexpensive. No lawyer is required. Filing fees range from $75–$200. Most provinces allow online filing.
- Collections agency: For amounts where you are willing to accept 60–70 cents on the dollar. The agency handles pursuit; you receive what remains after their fee.
- Dispute resolution services: Some professional associations and industry groups offer mediation between members and their clients.
Small Claims Court Limits by Province (2026)
| Province | Small Claims Limit |
|---|---|
| Ontario | $35,000 |
| British Columbia | $35,000 |
| Alberta | $50,000 |
| Quebec (Civil Division) | $15,000 |
| Manitoba | $10,000 |
| Saskatchewan | $20,000 |
| Nova Scotia | $25,000 |
| New Brunswick | $20,000 |
Protecting Yourself Before It Happens Again
- Run a basic credit check or review the company’s reputation on Google before taking on large projects with unknown clients.
- For any project over $1,000, require a written contract with explicit payment terms, late fee language, and a clause stating that ownership of deliverables does not transfer until payment is received in full.
- Pause work on active projects if an invoice goes more than 14 days past due — do not continue delivering while an existing invoice is unpaid.
Frequently Asked Questions
Can I withhold the final deliverable until payment is received?
Yes, provided your contract includes a clause stating that ownership of work product does not transfer to the client until full payment is received. Without this clause, a client may argue they are entitled to work you have already delivered. Include this language in every contract going forward.
What if the client disputes the invoice?
A dispute does not excuse non-payment on undisputed portions. If the client disputes $200 of a $1,500 invoice, they should pay $1,300 and formally contest the remaining $200. Keep all communication in writing. If the dispute cannot be resolved, small claims court allows you to file for the undisputed amount while the dispute is settled separately.
Does a late payment affect my GST/HST filing?
If you file GST/HST on an accrual basis, you owe GST/HST when the invoice is issued, regardless of when you are paid. If you are on cash accounting (available for businesses with under $1.5 million in annual taxable supplies), you remit GST/HST only when you actually receive payment. If you are unsure which method you use, check with your accountant.