This checklist is for business owners and finance teams who want to know, in order, what to do when a customer will not pay. Each stage links to a detailed guide.
Stage 1: get your documents in order
- Signed quotation, purchase order or contract.
- Your terms and conditions, including payment terms and any late-interest clause.
- Delivery orders or proof of service, signed by the customer where possible.
- The invoice, with date, amount and due date.
- Statements of account and any correspondence acknowledging the debt.
- The customer's correct legal name and registration number from SSM.
Most disputes are won or lost on these papers. A signed delivery order and an email acknowledging the balance are worth more than any argument later.
Stage 2: reminders (due date to 30 days overdue)
- Send a friendly reminder on the due date.
- Call the person who approves payments at around 7 to 14 days overdue. Ask for a date.
- Confirm any promise in writing the same day.
- Send a firm reminder at 30 days, stating that the account will be escalated.
If the customer raises a complaint about the goods or service, deal with it now and in writing. An unresolved complaint becomes a defence.
Stage 3: letter of demand (30 to 60 days overdue)
A letter of demand sets out the amount, the basis of the claim and a deadline, usually 7 to 14 days, after which legal action will follow. It should come from a lawyer or recovery firm on letterhead. Many debts settle at this point. Our debt collection agency service issues demands and negotiates the response.
Stage 4: choose the escalation route
| Debtor and debt | Route |
|---|---|
| Company, undisputed, over RM50,000 | Section 466 statutory demand: 21 days to pay, then a winding-up petition. See our section 466 notice of demand guide. |
| Company, disputed or under RM50,000 | Civil claim in court. |
| Individual or sole proprietor | Civil claim, then enforcement. Bankruptcy only for debts of at least RM100,000; a rise to RM150,000 is announced but not yet law. See our bankruptcy threshold guide. |
Stage 5: file the claim
File in the court that matches the amount: the Magistrates' Court for claims up to RM100,000, the Sessions Court up to RM1 million and the High Court above that. Serve the writ and statement of claim on the debtor. If the debtor does not enter appearance or file a defence in time, you can apply for judgment in default. If they file a defence with no real merit, apply for summary judgment.
Check the limitation period. Most contract claims must be filed within six years from when the cause of action arose under the Limitation Act 1953. Our cost to sue for a debt article covers fees.
Stage 6: judgment
A judgment states the amount owed, plus interest and costs. It does not pay itself. Many debtors settle once judgment is entered; record any settlement as a consent judgment or instalment order so default can be enforced quickly.
Stage 7: enforcement
- garnishee orders: freeze and collect the debtor's bank balance.
- writ of seizure and sale: seize and auction movable assets.
- judgment debtor summons: examine the debtor on oath about their means.
- Winding-up or bankruptcy: where the thresholds are met.
Stage 8: know when to stop
Not every debt is worth the cost of enforcement. If the debtor has no assets, no income and no guarantor, writing off may be the commercial answer. Make that call on facts: a CTOS or SSM search, a site visit, or a JDS examination. See CTOS report: what next.
Quick reference
- Documents complete and debtor identity confirmed.
- Reminders at due date, 14 days and 30 days.
- Letter of demand at 30 to 60 days.
- Statutory demand or court claim.
- Judgment.
- Enforcement.
Use our debt claim calculator to work out the claim, and our debt recovery service if you want the whole process handled.
Frequently asked questions
How do I recover an unpaid invoice in Malaysia?
Organise your documents, send reminders, issue a letter of demand, then file a court claim or, for an undisputed company debt over RM50,000, serve a section 466 statutory demand. Enforce any judgment through garnishee, seizure and sale or a judgment debtor summons.
How long do I have to sue for an unpaid invoice?
Generally six years from when the cause of action arose for contract claims, under the Limitation Act 1953.
Which court do I file in?
Magistrates' Court for claims up to RM100,000, Sessions Court up to RM1 million, and the High Court above that.
Is a letter of demand required before suing?
It is standard practice and often settles the matter. It also helps on costs, because it shows the debtor was given a chance to pay.