As a small business owner, you need a steady cash flow to keep operations running smoothly. But what do you do when a client won’t pay? The good news is there’s a clear path for you to take: small claims court for unpaid invoices. It’s an accessible, cost-effective way to recover your money without having to get tangled up in complicated legal processes.
This guide will help you understand how small claims court works, when to use it, and what to do to ensure the court awards the money you are owed.
What is a Small Claims Court?
Small claims court is a special type of court that settles relatively small disputes without having to go through all of the expensive and time-consuming steps of traditional litigation. It’s quicker, simpler, and more affordable, and in many cases, you don’t even need to hire a lawyer to handle the case for you. This is especially appealing for small business owners who are trying to collect unpaid invoices and want to avoid the long, drawn-out, and expensive process of a full court trial.
Who Can Use the Small Claims Court for Unpaid Invoices?
If you’re a small business with unpaid invoices, small claims court for unpaid invoices can be an appropriate course for you to take. The nature of the claims process is typically for businesses and individuals looking to recoup debts that are within the court’s financial jurisdiction, which can vary based on your location.
In most cases, you can take your case to small claims court as long as the debt is under a maximum limit, often anywhere between a few hundred to several thousand dollars in value. This makes it an excellent option for small businesses that have a small or moderate-sized claim that would otherwise be too costly to pursue through traditional legal channels.
How Does the Process Work?
Check Your Eligibility
Start by ensuring that your claim can be taken to small claims court by checking the financial limit for claims set by your local court. You’ll also want to confirm that the amount of the unpaid invoice is within that threshold.
Gather Documentation
Gather all the supporting documents you need for the case — this can include things like the unpaid invoice, a record of any communication, and any contracts or agreements where payment was discussed. Strong documentation can make your case stronger.
File the Claim
After that, you’ll need to file the case with the small claims court of your jurisdiction. This typically involves filling out a claim form and paying a small fee. In many places, you can file the claim online.
Serve the Defendant
After you file the claim, you will need to notify the person or business (the defendant) that you’re suing by serving them with the claim documents. This can typically be done through the mail or by using a court-approved process server.
Attend the Hearing
On the date of the hearing, the judge will hear from each side and make a decision. Your presentation should be short and to the point. Make sure you have solid evidence to present to the judge. If you win, the judge will order the defendant to pay you the money you are owed.
Avoid Common Mistakes
Small claims court is designed to be an easy way to recover money a business is owed, but business owners commonly make mistakes that might prevent them from reaching a successful conclusion. Here’s how to avoid them:
- Don’t Wait Too Long: There are often deadlines for filing claims, so make sure you act quickly.
- Be Organized: Have all your documentation neatly compiled and easily accessible.
- Stay Professional: Even if you’re frustrated, approach the situation professionally in court.
- Know the Defendant’s Finances: If the defendant is a business, do a little research to ensure they can pay the debt if you win the case.
Get the Support You Need
If you’re not sure how to pursue the small claims court unpaid invoices process, there are several resources available to you. For more in-depth guidance and details on your next steps, check this guide for small business owners on how to take your claim to court as effectively as possible, and how to increase your odds of winning at the same time. With a better understanding of the process and avoiding potential mishaps, you can get what’s owed to you and make the best next step for your business.
