The Four-Stage Escalation Framework

Define the trigger for each stage before it is needed. Decide once what your policy is — then apply it to every invoice, every time.

Stage 1: Automated Reminders (Days 1–30)

Stage 1 handles the majority of overdue invoices. 80% of payments come through within 24 hours of first automated contact. Trigger to move to Stage 2: no payment and no substantive communication after 3–4 contacts over 21–28 days.

Stage 2: Formal Notices (Days 31–60)

A formal notice stating the amount, original due date, history of requests, and consequence of non-payment changes the signal. Also offer a payment plan at this stage.

Stage 3: Letter of Demand (Days 61–90)

A solicitor's Letter of Demand significantly increases the proportion of debts that resolve without further legal action. Many invoices that have resisted months of follow-up resolve within days of a formal demand.

Stage 4: Formal Legal Action (Days 90+)

• Statutory demands for debts over $4,000 owed by a company

• Tribunal claims for appropriate matters

• Referral to a commercial collections specialist

The Cost of Waiting Too Long

On a $20,000 invoice, the difference between acting at 30 days and waiting until 90 is $5,000–$7,000 in expected recovery value — lost not to bad luck, but to inaction.

Frequently Asked Questions

When should I send a letter of demand for an unpaid invoice in Australia?

A letter of demand is typically appropriate when informal reminders have been exhausted (usually 30–60 days), no payment plan has been agreed upon, and the invoice is not subject to genuine dispute. A solicitor's letter at the 60–90 day mark is more effective than a self-drafted one.

What happens if a business ignores a statutory demand in Australia?

If a company fails to pay, secure, or compound a statutory demand within 21 days, the creditor can apply to wind up the company. This serious consequence frequently prompts payment or negotiation even when months of informal follow-up have failed.

How much does it cost to take a business to court for non-payment in Australia?

Small claims tribunals (VCAT, NCAT, etc.) handle disputes up to $100,000 with filing fees typically under $500. For larger debts, Magistrates Court handles claims up to $100,000 in most states at $500–$2,000 in filing fees.

About Chargetree

Chargetree is an automated accounts receivable and collections platform built for Australian businesses. We help tradies, contractors, agencies, and service businesses get paid faster — without damaging client relationships. Chargetree integrates with Xero to automate payment reminders, escalation workflows, and collections from just $69 a month. No commissions. No lock-in. Learn more at chargetree.co.

Stop letting the escalation decision cost you money.

Chargetree tracks where every invoice sits in the escalation cycle and sends the right communication at the right stage automatically. You get notified when human judgment is needed.

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