IT Consultant: Built the System, Client Refuses Final Payment? Send a Letter of Demand

You scoped it, built it, tested it, and went live. Their team logs in every morning. It’s running their invoicing, their bookings, their stock. And now the final payment is “under review” because of a “few issues” that were never in scope, or a “reduced budget”, or just radio silence.

Being paid for delivered IT work should not be a negotiation. Here’s how to close it out.

Live use is acceptance

In contract law, a client who takes delivery and uses the work has accepted it. If they’d rejected the system, they’d have stopped using it. The fact that they’re running their business on it is your best evidence. Every login is proof.

Under the Australian Consumer Law and general contract principles, your obligation is to deliver work with due care and skill that matches the agreed scope. It’s not to deliver every feature they thought of after signing. Scope creep is not a reason to withhold payment for what was agreed.

What to pull together

• The proposal, SOW or contract showing scope and milestones
• Sign-off emails, UAT approvals, go-live confirmation
• Change requests you’ve flagged as out of scope
• The unpaid invoice and any reminders sent
• Evidence of ongoing use (server logs, user counts)

Your leverage: licensing and IP

If your terms retain intellectual property or the software licence until final payment, say so. Many IT contracts do. A client using unlicensed software is in breach and, in some cases, infringing copyright under the Copyright Act 1968. You don’t need to threaten to switch anything off (and you generally shouldn’t, as that can create liability), but stating the legal position clearly is powerful.

The Letter of Demand

A Letter of Demand is the formal step before a claim. It should:

• Summarise the engagement, the deliverables and the go-live date
• State the outstanding amount, invoice number and due date
• Address any disputed “issues” briefly, noting they’re out of scope or already resolved
• State your licensing/IP position
• Demand payment within 14 days, and warn of a tribunal or court claim with interest and costs

Businesses that stiff their IT consultants are usually betting you’ll take a haircut to avoid the hassle. A formal letter tells them the hassle is now theirs.

Every week costs you

A $15,000 final milestone is a month of billing for many consultants. Delayed payment means cash flow stress, delayed hires and lost projects. Don’t let it drift past 30 days overdue.

If it goes further

Amounts up to your state’s small claims limit go to VCAT, QCAT or the Magistrates Court. In New South Wales a business debt goes to the Local Court, not NCAT: the Small Claims Division up to $20,000 and the General Division over $20,000 up to $100,000. Larger amounts go to the District or County Court. Either way, a clear SOW plus evidence of live usage is the core of your claim.

Claim Done drafts your Letter of Demand for $49. Done in about 5 minutes. You approve it before it is sent.