Unpaid invoices can significantly disrupt cash flow and strain business operations, especially for small and medium-sized enterprises. Alberta businesses have several legal and practical tools to manage receivables efficiently and recover debts when clients fail to pay.

This blog outlines key strategies for addressing unpaid invoices while remaining compliant with Alberta’s legal framework.

Establish Clear Payment Terms from the Start

The most effective way to avoid unpaid invoices is to establish clear, written payment terms before any work is done or products are delivered. These terms should be included in contracts, purchase orders, or service agreements, and should clearly specify:

• Payment due dates
• Late fees or interest charges
• Methods of payment accepted
• Consequences for non-payment

Having these terms in writing provides a legal basis for pursuing payment later on and helps set expectations for the client.

Send Prompt and Professional Invoices

Prompt invoicing can have a direct impact on how quickly you get paid. Best practices for effective invoicing include:

• Sending invoices immediately after the delivery of goods or services
• Ensuring the invoice includes all required information: invoice number, date, client details, description of goods/services, and payment terms
• Making payment options as convenient as possible

Professional and timely invoicing sends a message that your business is organized and expects timely payment in return.

Follow Up Consistently but Diplomatically

A structured follow-up process can be very effective if a payment is overdue. This often includes:

1. A friendly reminder email a few days after the due date
2. A more formal notice will be sent if payment remains outstanding after 14–30 days
3. A final demand letter indicating potential legal action if payment is not received

Always keep records of all communications with the debtor. Being polite but firm helps preserve business relationships while clearly conveying your seriousness.

Use Interest and Late Fees Strategically

Applying interest or late fees can encourage prompt payment if your contract allows for it. Under Alberta law, businesses can charge interest on overdue invoices if:

• It is clearly stipulated in the contract
• The rate is not unconscionable (e.g., excessively high)

If no rate is agreed upon, the default rate under the Alberta Judgment Interest Act may apply. It is currently set at 1.5% annually (subject to periodic change).

Offer Payment Plans When Appropriate

In some cases, a client may be willing but unable to pay in full. Offering a structured payment plan can be an effective compromise. Make sure any such agreement is documented in writing and signed by both parties.

The plan should outline:

• Total outstanding balance
• Payment amounts and due dates
• Consequences for missing a scheduled payment

This strategy can often help businesses recover most or all of the debt without litigation.

Retain a Lawyer for a Demand Letter

When informal follow-ups fail, having a lawyer send a demand letter on your behalf can be a powerful next step. A demand letter from legal counsel carries more weight and signals your intent to escalate the matter.

The letter typically includes:

• A summary of the outstanding debt
• A demand for payment by a specific date
• Reference to potential legal consequences for continued non-payment

In many cases, this alone is enough to prompt action from a non-paying client.

File a Civil Claim in the Alberta Courts

If the debtor still fails to respond, you may consider initiating a civil claim. The venue depends on the amount of the unpaid invoice:

• Provincial Court (Small Claims Court): For amounts up to $100,000
• Court of King’s Bench: For claims over $100,000 or where more complex legal issues are involved

To initiate a claim, you will need to file a Civil Claim form and pay a filing fee. The debtor (defendant) is then served with the claim and has a set period to respond. If they fail to do so, you may be able to obtain a default judgment.

Enforce a Judgment Through Garnishment or Seizure

Winning a court judgment is only part of the process. If the debtor still refuses to pay, you can enforce the judgment through various legal mechanisms, such as:

• Garnishing wages or bank accounts
• Seizing and selling personal property through a writ of enforcement
• Registering the judgment against the debtor’s land

All enforcement proceedings must follow strict procedural rules under Alberta’s Civil Enforcement Act.

Be Cautious About Naming and Shaming

It may be tempting to name a non-paying client publicly, but doing so carries legal risk. Defamation laws in Alberta prohibit statements that could harm someone’s reputation unless the statements are true and made with proper legal justification.

Before taking any public action, consult with legal counsel to ensure compliance with privacy and defamation laws.

Consider Using a Collection Agency

Registered debt collection agencies in Alberta can legally pursue debts on your behalf. These agencies must comply with the Consumer Protection Act and associated regulations.

Pros:

• They handle the time and stress of debt collection
• May succeed in collecting where internal efforts have failed

Cons:

• They typically charge a percentage of the collected amount
• May affect your ongoing relationship with the client

Prevent Future Issues with Better Credit Controls

Once you’ve dealt with unpaid invoices, revisiting your internal credit policies is wise. Consider the following measures:

• Conducting credit checks on new clients
• Requiring deposits or upfront payments
• Limiting credit to established or reliable clients
• Using credit applications that clearly set out terms

Strong credit policies help ensure that you only extend terms to customers who are likely to pay on time.

Resolve Unpaid Invoices and Protect Your Alberta Business Relationships

Unpaid invoices are a common challenge for Alberta businesses, but they don’t have to become a major problem. With clear contracts, structured follow-up, and legal support where needed, most debts can be resolved without damaging relationships or cash flow.

Civil Litigation and Business Lawyers Ensuring Your Rights Are Protected

Engaging a lawyer early in the debt recovery process can save you time, money, and frustration. A civil litigation lawyer can review your contracts and payment terms, advise on enforcement options, draft demand letters, and even represent you in court. At Getz Collins and Associates in Calgary and Strathmore, our experienced civil litigation and business lawyers will help you avoid common mistakes and seek more effective remedies. Contact us online or call 587-391-5600 today to schedule a confidential consultation regarding your litigation matter.