Entry B1 v1 — Debt recovery / unpaid invoices

What to watch for

Six things that change how the decision tree actually plays out — most of which the procedural debt-recovery content gets wrong by treating "send a letter then go to Disputes Tribunal" as the sequence.

1. The first 30 days set the tone. Automation, not theatre. Most invoices don't get paid because the customer forgot, the invoice went to the wrong person, or the customer's pay-run cycle doesn't match your terms. Automated reminders — at the due date, at 7 days overdue, at 14 days — recover most of these without a phone call ever happening. Send them automatically through your accounting software (Xero, MYOB, Hnry, and most others have this built in) and word them factually, not pleadingly. "Invoice 1024 is now 14 days overdue. Could you confirm receipt and expected payment date?" recovers more than "Just following up on Invoice 1024 — please pay when convenient." If automated reminders haven't worked by day 30, that's the signal to switch from automation to human contact, not the signal to escalate further. Escalation before a phone call is theatre.

2. The phone call before the lawyer letter recovers more than the lawyer letter does. If reminders have failed, call the person who runs the business — not accounts payable, the actual decision-maker. Ask plainly: is this invoice in dispute, and if so, what's the issue. Most "non-paying customers" turn out to be either confused about something specific (a line item, a delivery question, an unmet expectation) or facing a cashflow problem they're handling poorly. Both are recoverable through conversation. The information you get from this call also shapes everything downstream — a customer who can't pay needs different handling from a customer who won't, and a customer who's disputing something specific needs different handling from either. If they don't return the call after two attempts, that's diagnostic in itself.

3. The Disputes Tribunal threshold is now $60,000. This is recent and material. Effective 24 January 2026, the Disputes Tribunal Amendment Act 2025 doubled the jurisdictional limit from $30,000 to $60,000.¹ This is recent enough that older content (and accountants who haven't updated their advice since 2025) may still cite the $30,000 figure. The implication for SMBs: most invoice disputes that previously fell into the awkward $30,001-$60,000 gap — too big for the Tribunal, too small for the District Court to be economic — can now go to the Tribunal. The fee is $468 for claims in that range, lawyers can't represent you at the hearing, the process typically resolves within 6-8 weeks of filing, and decisions are enforceable through the District Court if the other party doesn't comply. For most SMB unpaid-invoice cases, the Tribunal is now the right forum.

4. The statutory demand is a different tool — and the wrong one if the debt is in dispute. A statutory demand is served under section 289 of the Companies Act 1993, on a company that owes you an undisputed debt of $1,000 or more.² The clocks matter and they're not the same: the company has 15 working days to pay or come to an arrangement, but only 10 working days to apply to the court to set the demand aside. If it does neither, the failure to comply raises a legal presumption that the company can't pay its debts (section 287), which grounds an application to put it into liquidation (section 241). That presumption is the whole point — the demand creates a credible, expensive alternative to paying, and a company that simply won't pay an undisputed debt will often pay inside the 15 days rather than defend a liquidation. But the cost of misreading this is real. A statutory demand is only for a debt that isn't genuinely disputed. If the customer is contesting the amount, the quality, or whether they owe it at all, serving a demand is the wrong move: they can apply to set it aside, you can be ordered to pay their costs, and a demand used on a disputed debt can be treated as an abuse of process. So the test is narrow — undisputed debt, owed by a company that won't pay, not one that can't. For a customer who genuinely can't pay, the demand only accelerates a liquidation in which you join the unsecured-creditor queue and typically recover cents on the dollar. The diagnostic from your phone call (watch-for #2) is what tells you which of the three you're holding: won't pay, can't pay, or disputes the debt.

5. Bad-debt write-off has IRD treatment. Don't lose the GST claim back. If you've concluded the debt is genuinely unrecoverable — through the Tribunal failing, the company being liquidated, or the customer being uncontactable — and you're GST-registered on the invoice basis, you can write the debt off as a bad debt and claim back the GST you've already paid on it.³ The bad-debt write-off needs to be a commercial decision (you've genuinely concluded recovery isn't viable) supported by evidence of recovery attempts, not just a paperwork move to recover GST. Your accounting software handles the mechanism; your accountant should be involved in the timing decision — writing off in the wrong period or without sufficient evidence creates IRD exposure rather than relief. The income tax deduction works similarly but only if you originally recognised the income (which you did, on the invoice basis). Don't assume the write-off is the end of the matter — it's a tax-side closure, and the customer's debt to you continues legally; you can still try to recover it later if circumstances change, in which case the GST you claimed back becomes payable again.

6. Commercial debt collectors take a cut, but they get paid more often than you do. Debt collection agencies typically charge a percentage of recovered debt (commonly 15-30% depending on the age and difficulty), or a flat fee for cease-and-desist correspondence. The trade-off is real: you recover less per recovered dollar, but you recover more dollars overall, because the collector has scale economics on the chase that you don't. Worth considering for: invoices old enough that you've moved past the personal-relationship-with-customer stage, debts where the time you'd spend chasing exceeds the recovered amount, and debts where the customer is responding to you but not to your reminders. Less useful for: very small debts (the percentage cut makes recovery uneconomic), debts where the customer has a legitimate dispute (the collector can't resolve disputes, only chase undisputed debts), and debts where the relationship has long-term value you don't want to damage. Choose a collector that's a member of the Financial Services Federation or operates under their code; some smaller operators behave aggressively in ways that create reputational exposure for you.

A separate point on what the decision tree actually optimises for. The goal isn't winning the dispute — it's getting paid, with the lowest cost-of-recovery and the least damage to ongoing relationships you care about. Most ways to win the dispute (Tribunal orders, court judgments, statutory demand-driven payments) extract money from a recoverable customer at the cost of the relationship; most ways to preserve the relationship (writing off, accepting a payment plan, eating part of the loss) extract less money. The right call varies by debt size, customer importance, age, evidence quality, and your own cashflow position. A $1,200 invoice from a customer you'll never deal with again is not the same problem as a $40,000 invoice from a customer who's normally on time and is going through a hard quarter. Run the decision tree per case, not as a single policy. The procedural cost of escalation is low; the relational cost of escalation is often high; the cashflow cost of not escalating compounds. The skill is in the diagnostic call and the judgment about which lever to reach for next.

Where this entry stops

This entry covers the decision tree for chasing unpaid invoices in NZ — the levers available, when each applies, and the recent changes that affect SMB invoice disputes specifically. It doesn't cover:

• Disputes Tribunal hearing procedure once you've decided to file. Corpus territory; route to the Disputes Tribunal site for the application form and process detail.
• Customer disputes about your goods or services — where the customer is disputing the invoice on quality, delivery, or breach grounds. Different shape; the negotiation comes first, the recovery question second. Corpus territory.
• District Court claims above $60,000. Specialist legal territory; you'll be working with a lawyer for any claim that size and your accountant should be involved in the cost-benefit call. Pointer-only at v1.
• Liquidation as a creditor — what to do when your customer goes into liquidation. Specialist territory; the receiver/liquidator runs the process and you respond to it rather than driving it. Pointer-only at v1.
• Setting up payment terms and credit checks upstream. The prevention side of the same problem. Corpus territory.

For Disputes Tribunal procedural detail, the Disputes Tribunal site carries the application process and decision archive. For statutory demand procedure, the Companies Office has guidance on liquidation processes that includes the creditor side. For bad-debt write-off mechanics, Inland Revenue covers both the tax-side and the GST-side.

Last verified 28 May 2026. Full source list: references.