How to Recover Unpaid Invoices in Nigeria: A Guide for Businesses

Unpaid invoices can create serious cash-flow problems for businesses. A company may have delivered goods or completed services exactly as agreed, yet still struggle to receive payment from a customer or client.

For small and growing businesses in particular, a few substantial unpaid invoices can affect the ability to pay employees, suppliers, rent, taxes, and other operating expenses.

Knowing how to recover unpaid invoices in Nigeria can therefore help businesses protect their cash flow and take appropriate action when customers fail to honour their payment obligations.

What Is an Unpaid Invoice?

An unpaid invoice is a bill issued by a business for goods supplied or services provided that remains outstanding after the agreed payment date.

An unpaid invoice may arise because:

• The customer disputes the amount.
• The customer claims the goods or services were defective.
• The customer is experiencing financial difficulties.
• The customer simply refuses to pay.
• There was a misunderstanding about the payment terms.
• The customer has stopped responding.

Whatever the reason, the business should take appropriate steps to establish and enforce its right to payment.

1. Have Clear Payment Terms From the Beginning

The best way to deal with unpaid invoices is to reduce the likelihood of them occurring in the first place.

Businesses should establish clear payment terms covering:

• The price of the goods or services.
• Payment due dates.
• Payment methods.
• Deposits or advance payments where appropriate.
• Consequences of late payment.
• Interest, where contractually and legally appropriate.
• Dispute resolution.

These terms should preferably form part of a written agreement accepted by both parties.

2. Keep Evidence of the Transaction

Before attempting to recover an unpaid invoice, gather all relevant documents.

These may include:

• The contract.
• Invoice.
• Purchase order.
• Delivery note.
• Receipts.
• Bank records.
• Emails.
• WhatsApp messages and other relevant communications.
• Evidence that the goods were delivered or services performed.
• Acknowledgment of the debt.

Good documentation can be crucial if the customer later denies owing the money.

3. Send a Reminder

Sometimes an unpaid invoice is the result of an oversight rather than an intentional refusal to pay.

A polite reminder can be an appropriate first step.

The reminder should identify:

• The invoice number.
• Amount outstanding.
• Original payment date.
• Goods or services supplied.
• New deadline for payment.

If payment is subsequently made, the matter can be resolved without further action.

4. Send a Formal Demand for Payment

If informal reminders do not work, the business may consider sending a formal demand.

A properly drafted demand letter can:

• State the amount owed.
• Identify the basis of the debt.
• Refer to relevant contractual obligations.
• Demand payment within a specified period.
• Explain the consequences of continued non-payment.

A formal demand can sometimes resolve a debt without the need to commence court proceedings.

5. Consider Negotiation

Where the debtor genuinely wants to pay but is experiencing temporary financial difficulties, negotiation may provide a practical solution.

Depending on the circumstances, the parties may agree to:

• Instalment payments.
• A revised payment date.
• A negotiated settlement.
• Other commercially reasonable arrangements.

Any important settlement should be properly documented.

6. Consider Mediation or Other ADR Options

Not every debt dispute needs to proceed immediately to litigation.

Where the parties disagree about the amount owed or the performance of the underlying contract, mediation or another appropriate form of Alternative Dispute Resolution may help resolve the dispute.

This may be particularly useful where the parties wish to preserve their commercial relationship.

7. Commence Legal Proceedings Where Necessary

If the debtor refuses to pay and other efforts fail, legal proceedings may become necessary.

The appropriate procedure will depend on matters such as:

• The amount claimed.
• The nature of the transaction.
• The terms of the contract.
• The identity and location of the debtor.
• The applicable court’s jurisdiction.
• Whether the debt is genuinely disputed.

A lawyer can assess the circumstances and advise on the appropriate legal strategy.

8. Enforce the Judgment

Obtaining a judgment in favour of the business may not automatically result in payment.

If the debtor still refuses to comply, the judgment creditor may need to take appropriate enforcement steps.

Depending on the circumstances, enforcement mechanisms may include garnishee proceedings or other lawful processes for enforcing a monetary judgment.

This is why businesses should consider the entire recovery process—from establishing the debt to enforcement—when deciding how to proceed.

What If the Debtor Disputes the Debt?

A debtor may claim that:

• The goods were never delivered.
• The services were not properly performed.
• The invoice is inaccurate.
• Payment has already been made.
• The contract was terminated.
• The amount claimed is excessive.

Where a genuine dispute exists, the business should not assume that simply issuing an invoice automatically proves the debt.

The underlying contract, evidence of performance, payment records, correspondence, and other relevant evidence may need to be examined.

Common Mistakes Businesses Make When Recovering Debts

Businesses sometimes make debt recovery more difficult by:

• Failing to use written contracts.
• Accepting vague payment terms.
• Continuing to supply goods to a persistently defaulting customer without reassessing the risk.
• Losing important records.
• Making threats or using unlawful methods of recovery.
• Waiting too long before taking action.
• Commencing proceedings without properly assessing the debtor’s ability to pay.

A structured credit-control and debt-recovery process can help reduce these risks.

Never Use Self-Help to Recover a Debt

A business should not resort to threats, harassment, unlawful seizure of property, or other improper methods simply because a customer owes money.

Debt recovery should be carried out through lawful contractual and legal mechanisms.

Where a debt cannot be recovered voluntarily, professional legal advice can help determine the appropriate next step.

How Businesses Can Prevent Bad Debts

Prevention is usually better than recovery.

Businesses can reduce the risk of unpaid invoices by:

• Conducting appropriate checks before extending credit.
• Using written contracts.
• Setting clear payment deadlines.
• Requesting deposits where appropriate.
• Invoicing promptly.
• Monitoring overdue accounts.
• Keeping accurate records.
• Suspending further credit where appropriate.
• Using appropriate contractual protections.

These measures can significantly improve a business’s ability to manage its receivables.

Why Legal Advice Can Make a Difference

Debt recovery is not simply about demanding that someone pay money.

A lawyer can help determine:

• Whether a legally enforceable debt exists.
• The strength of the claim.
• The appropriate demand procedure.
• Whether negotiation is advisable.
• Whether litigation should be commenced.
• Which court or procedure may be appropriate.
• How a judgment can subsequently be enforced.

Early legal advice can prevent businesses from wasting time pursuing claims that are poorly documented or procedurally defective.

How Lexforte Attorneys Can Help

At Lexforte Attorneys, we assist individuals, businesses, companies, and organisations with the recovery of outstanding debts.

Our services include:

• Debt recovery advisory.
• Review of contracts and supporting documents.
• Formal demands for payment.
• Negotiation and settlement.
• Mediation and dispute resolution.
• Debt recovery litigation.
• Enforcement of judgments.

We take a strategic approach to debt recovery, balancing the need for effective recovery with the commercial interests of our clients.

Conclusion

Knowing how to recover unpaid invoices in Nigeria is important for every business that sells goods or provides services on credit. Clear contracts, proper documentation, effective credit control, timely demands, and appropriate legal action can help businesses protect their cash flow and recover money owed to them.

Businesses should also remember that debt recovery is not limited to filing a lawsuit. Depending on the circumstances, negotiation, settlement, mediation, or other lawful recovery strategies may provide a faster and more commercially sensible solution.

If a customer or client owes your business money, taking action early can make a significant difference.

Are customers or clients owing your business money? Contact Lexforte Attorneys for professional debt recovery advice and assistance in recovering outstanding debts.