You did the year-end. You lodged the BAS on time, every quarter. You chased them for receipts, sorted out their mess, and got them a refund they didn’t expect. Then they moved to a cheaper accountant, or just stopped replying, and left your last three invoices sitting unpaid.
Accountants and bookkeepers are among the most under-paid professionals in Australia when it comes to unpaid fees, partly because you’re too polite to chase. It’s time to stop being polite.
Your engagement letter is a contract
If you issued an engagement letter (as your professional body requires), you have a written contract setting out the scope and fees. Even without one, a client who instructed you to do the work and accepted the outputs owes you the fee. Their tax return was lodged. Their BAS was accepted by the ATO. The work is done and provably so.
Liens on client documents
Accountants have a common law lien over client documents they’ve worked on until fees are paid. That means you’re generally entitled to hold their working papers and files. There are limits (you can’t hold documents that belong to the client and pre-date your engagement, and professional rules apply), but a polite mention of your lien in the letter is often enough to prompt payment.
Ready to put it in writing?
Answer 3 quick questions to check you have the details your document needs, and see your next step.
1. Who owes you?
2. How much?
3. Do you have it in writing?
Your result is ready. Where should we send it?
The Letter of Demand
A Letter of Demand is the last step before formal action, and for accounting fees it’s remarkably effective. It should:
- Reference the engagement letter and the services performed, with lodgement dates
- List each unpaid invoice with amounts and due dates
- Note any interest or recovery costs under your terms
- Set a 14-day deadline
- State that a small claims application will follow, with interest and costs, and that any judgment will affect their credit file
Small business clients especially do not want a default judgment on the record. It affects their ability to get finance.
Where they’ve gone quiet
Send the letter by email and by post to their registered address (check ASIC or the ABR if they’re a company). If they’ve moved, a bit of searching usually finds them: they’ve registered a new business, updated LinkedIn, or their new accountant has lodged something. Serve on the entity you engaged with: if it’s a Pty Ltd, the company; if it’s a sole trader, the individual.
The cost of not chasing
For a small practice, $5,000 in unpaid fees might be a month of profit. Every month you wait, the client is less likely to pay and more likely to dispute the work. Chase within 60 days.
Next step
If the deadline passes, lodge with VCAT, QCAT or your state’s small claims court. In New South Wales, lodge in the Local Court, not NCAT: the Small Claims Division up to $20,000 and the General Division over $20,000 up to $100,000. Bring your engagement letter, invoices and lodgement confirmations as evidence.
Claim Done drafts your Letter of Demand for $49. Done in about 5 minutes. You approve it before it is sent.
What happens when you send a Letter of Demand
Same problem. What a prepared case looks like.