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Three Ways to Stop Your Corporate Customers from Defaulting on Invoices estimates that the average small business has $84,000 in unpaid invoices. [1] That is a lot of money that US small businesses are not taking in. Fortunately, if your customers are other businesses, there are a few things you can do at the onset of a deal to increase your chances of getting paid.

  1. Add provisions to the contract that call for additional charges and fees.

First off, yes, when providing products or services to another business you should have a written contract signed. In that contract, you can add provisions that will “up the ante” if the other side does not pay you. One obvious provision is requiring your customer to pay a late fee if they do not pay on time. Additionally, you can also charge interest on all overdue payments at the highest annual rate allowed by law. Currently, that rate in North Carolina is eighteen percent.

Another, but less obvious provision, is requiring the customer to pay you “reasonable attorneys’ fees” if you take them to court to recover the overdue payments. Generally, North Carolina law does not allow parties to recover attorneys’ fees. One of the few exceptions to this is found under N.C. Gen. Stat. § 6-21.2. Under that statute, you can recover attorney’s fees in cases like this if your contract allows for it. However, the court will not award you with your actual attorneys’ fees. Instead, it will order the customer to pay an additional 15% of the debt.

Not only will these provisions place you in a better position if your customer does not pay, but most importantly, they warn your corporate customer that not paying may cost them even more down the road.

  1. Get a Guarantor.

A guarantor is a person or entity with an interest in the debtor who guaranties that the debtor will pay the amounts under the contract. When dealing with a small business client, the guarantor is usually the owner. To get a guarantor, you have the owner of the customer company sign a guaranty (yes, it is spelled “guaranty” and not “guarantee”).  A guaranty is a document under which the guarantor promises to pay the customer’s debts and make them perform under the contract.

Not only does such a document provide you with another party to pay the debt, but it also prevents the owner from hiding behind their corporate entity. When the owner’s personal funds and assets are at stake, you better believe they have motivation to pay you.

  1. Show your cards at the start.

While this may seem trivial, telling your corporate customers in the very beginning that you are a small business and you rely on getting paid timely may save you a lot of trouble down the road. I have even seen some clients include that in their contracts. It adds a human touch to a debt recovery process that often becomes rather unpleasant.

Also, anyone who enters into a contract is charged with knowing what the contract says. Unfortunately, that’s rarely the case. So, you can specifically point out to your customer the parts of the contract that state the consequences of not paying before they sign. Not only does this serve as a warning for your customer, but it is also a way to test them. If your customer protests these parts of the contract, you may want to reconsider the deal because they are already unsure if they can pay.

Businesses that have 100% of the invoices paid are rare if not non-existent. Luckily, there are steps you can take at the start of a customer relationship that will encourage timely payments. So, be vigilant and set your business up for success.


If you have any questions or would like to discuss the topic of this blog further, please feel free to email Aleksandra E. Anderson at


*This blog post does not constitute legal advice. Reading or in any way accessing this blog post does not form a client-attorney relationship between you and Anderson Legal, PLLC or any of its attorney(s).


The post Three Ways to Stop Your Corporate Customers from Defaulting on Invoices appeared first on Anderson Legal – Commercial and Construction Litigation – North Carolina.

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