In this article, you will learn:

• the common causes of unpaid invoices and how to prevent them;

• the legal and practical solutions available to recover debts;

• and, the digital tools that enable more rigorous payment tracking.

Anticipate, monitor, react: the winning combination

There is no miracle solution against bad payers, but there is a solid set of best practices to minimise the impact of late or unpaid invoices.

Key levers include:

• anticipation: draft clear quotes and contracts with precise payment terms;
• digital tools: use invoicing and reminder software to track outstanding payments;
• structured follow-ups: send reminders as soon as a deadline is missed. After two reminders, consider an amicable recovery process;
• credit insurance: for large transactions, credit insurance can protect you in case of client default.

Expert insight: “An unpaid invoice can quickly turn into a legal issue if you do not have a clear process in place. Investing in invoicing and reminder software can significantly reduce these risks.

This goes hand in hand with solid contractual documentation including precise payment terms. Ideally — depending on your sector and what is commercially acceptable — you should aim to receive all or part of the payment upfront.

For long-term projects, it is advisable to invoice in instalments after each milestone. A deposit reassures you of the client’s commitment and limits your exposure. It is always easier to refund money than to chase unpaid amounts.

This is particularly true for small amounts, where legal action would be disproportionate in terms of time and cost. Businesses sometimes abandon recovery for that reason. The key is to strike the right balance between legal security and commercial attractiveness: while full prepayment offers security, clients often prefer paying in full at the end.” – Guylaine Marchi Hanus, Founder of EIS

Prevention: know your clients and spread the risk

Avoid dependence on a single client

Relying heavily on one client exposes your business to significant financial risk. Diversification — across clients or market segments — ensures greater financial stability.

Check a company’s financial health

Before entering into a significant B2B contract, assess your client’s financial standing. In Luxembourg, the Trade and Companies Register (RCS) provides access to public financial statements. Agencies such as Creditreform offer detailed solvency reports. A preliminary review can prevent costly surprises.

Legal safeguards: clear contracts and advance payments

A well-drafted contract is your first line of defence. It should include:

• precise payment terms (deadlines and methods);
• late payment interest and, where appropriate, penalty clauses;
• advance payments (e.g., 30% deposit upon order) and progressive instalments for longer projects.

These provisions formalise the commercial relationship and provide a legal basis in case of dispute. Requirements differ between B2B and B2C contexts, and consumer protection rules must be respected.

Good to know: specific rules apply when dealing with consumers (consumer protection law).

Debt recovery: available routes

Amicable resolution: mediation and structured reminders

Amicable resolution is always the preferred route. In principle, it allows disputes to be resolved more quickly than through the courts, without incurring legal costs, while preserving business relationships and confidentiality.

• Reminders: send professional reminders by email, letter, or registered mail with acknowledgement of receipt, clearly stating the amount due, the overdue deadline, and a final period for settlement.
• Mediation: if reminders fail, you may contact the Luxembourg Civil and Commercial Mediation Centre (CMCC – (https://www.cmcc.lu/) for B2B disputes, or the Consumer Mediator for disputes between professionals and consumers (B2C).

Legal proceedings: when and why?

If reminders and amicable procedures fail, legal action may be considered. While prior amicable recovery is not legally mandatory (unless required by contract), courts generally appreciate evidence that you attempted to resolve the matter in good faith.
A formal notice (registered letter) is not mandatory but usually constitutes the final step before court proceedings. It recalls the amounts due, the contractual basis, and grants a final deadline before initiating legal action.

Depending on the amount of the claim, judicial procedures may be simplified. A lawyer is not always mandatory but is strongly recommended. To connect with experienced lawyers in this area, join our Collective and access recommended experts.

When a bad payer goes bankrupt: filing a claim

If a professional client enters bankruptcy proceedings, recovery becomes more complex. You must follow a specific procedure to register your claim within the bankruptcy process. The client company can no longer pay you directly; all payments must occur within the bankruptcy framework.
Your first reflex, when facing non-payment, should therefore be to verify whether bankruptcy proceedings have already been opened. For Luxembourg companies, the Trade and Companies Register (www.lbr.lu) allows you to check this information and provides the contact details of the appointed receiver to whom you must declare your claim.

For significant claims, consulting a lawyer may be advisable to assess recovery prospects.

With these tools and strategies, you can reduce the impact of unpaid invoices and protect your company’s financial health.