Quick answer
Before suing for an unpaid business debt, prove that the correct creditor has an enforceable claim against the correct debtor for a reconciled amount that is due. Then test the contract’s notice and dispute clauses, prescription chronology, statutory pre-enforcement steps, court jurisdiction, evidence and realistic recoverability. A demand may be useful, but it does not repair a defective claim and does not by itself necessarily interrupt prescription.
How to use this guide
The decision is not simply “invoice unpaid, therefore sue”. It should produce one of four recorded outcomes: proceed through the correct forum, send a properly scoped demand, seek a commercial resolution, or pause while evidence or authority is corrected.
Verify both legal entities
Use the agreement, order, invoice and official company information to identify the exact legal names and registration or identity numbers. A trading name is not always the contracting person. Check whether a sole proprietor, partnership, company, close corporation, trust or individual placed the order and who signed with authority.
Confirm that your business owns the debt. If it was ceded, sold, factored or transferred during restructuring, preserve the instrument and notices. If the creditor has changed its name or converted form, collect records connecting the original party to the claimant.
Check the debtor’s current status. Deregistration, business rescue, liquidation or sequestration can change the route and may require a claim in a collective process rather than ordinary summons. Do not threaten directors personally merely because a company has not paid; personal liability needs a separate legal basis.
Reconstruct the agreement and performance
Collect the signed contract and every document incorporated into it: quote, purchase order, terms, service level, specifications, change orders, delivery notes, acceptance records and correspondence. For an oral agreement, record who spoke, when, the exact terms remembered, later conduct and supporting witnesses.
Map the obligations on each side. What was supplied? When was acceptance due? Was a milestone approved? Did the customer reject work, raise defects, impose a set-off or withhold supporting documents? A genuine performance dispute may require expert or factual proof rather than a bare account statement.
Do not delete communications acknowledging delay, defects or a pricing dispute. They allow the claim to be valued honestly and reduce the risk of pleading an amount that cannot be proved.
Reconcile the amount line by line
Prepare a schedule showing invoice number, issue date, due date, principal, credit note, payment allocation, agreed interest basis, tax treatment and balance. Attach the bank and ledger records that support it. Separate contractual interest from statutory interest and collection costs. Do not add a percentage, penalty or attorney fee because it appears on a template.
Test whether the contract permits acceleration or cancellation and whether prerequisites were met. If several invoices arise under one relationship, do not assume they all became due on the same date. The due date affects breach, notice, prescription and pleaded relief.
If the agreement may be a regulated credit agreement, determine whether the National Credit Act 34 of 2005 applies, including its limited application to some juristic-person transactions. Statutory notices and enforcement restrictions are not optional where they apply, but they should not be inserted into every commercial invoice claim without classification.
Build a prescription chronology
The Prescription Act 68 of 1969 contains different periods for different debt categories. The familiar three-year period applies to many ordinary debts, but not all. Commencement can depend on when the debt was due and the creditor’s knowledge; delay provisions, acknowledgment of liability and service of qualifying judicial process may affect the result.
Create a dated table for contracting, performance, invoice, due date, default, every payment, every written or oral acknowledgment, demand, summons and service event. Preserve the exact words of any alleged acknowledgment. A request for time, settlement discussion or partial payment can have legal significance, but its effect is fact-specific.
Do not state that an ordinary demand, internal collection activity or negotiation “stops prescription”. A demand may be contractually required and strategically useful, but statutory interruption must be analysed separately. If the date may be close, obtain advice before allowing prolonged negotiations.
Check notice, dispute and forum clauses
Read the domicilium, notice, breach, cure, mediation, arbitration, jurisdiction and costs clauses together. Identify the permitted address and delivery method, what the notice must say, whether time to remedy is required and what follows if the breach continues. Keep delivery proof.
Some disputes belong in arbitration; others may be brought in the Magistrates’ Court or High Court subject to jurisdiction and procedure. The claim amount is only one jurisdiction factor. Place of performance, residence, contractual consent and subject matter can matter. The Magistrates’ Courts Act and current court rules must be applied to the facts rather than reduced to a generic monetary threshold that may change.
If the debtor disputes quality or claims damages, identify whether the contract permits set-off, whether the counterclaim is quantified and what evidence answers it. Avoid self-help such as entering premises, retaining unrelated property or disabling systems unless a clear lawful right has been verified.
Assess evidence and recoverability
For each element, list the source and witness: agreement, authority, performance, breach, amount, notices, jurisdiction and remedy. Preserve original electronic messages and metadata. The Electronic Communications and Transactions Act recognises data messages and addresses originality and evidential weight, but a screenshot without context is not automatically decisive proof.
Litigation can succeed on liability yet fail commercially if the debtor has no recoverable assets, is insolvent or can delay enforcement through a real dispute. Use lawful public information and existing account knowledge to assess recoverability. Do not make unauthorised credit enquiries, impersonate the debtor or publish allegations.
Compare the amount and evidence with expected legal fees, internal time, expert costs, delay and enforcement risk. Obtain a written scope from a lawyer covering demand, summons, defended proceedings, settlement and enforcement as separate stages. A costs order rarely reimburses every rand actually spent.
Make the pre-suit decision
Proceed only when the entity, cause of action, due amount, authority, notice, prescription position, forum and evidence are supportable. If one issue is missing, record who must obtain it and by when. If negotiation is sensible, use a written proposal that avoids unintended admissions and preserves procedural dates.
A strong file gives the adviser a one-page summary, entity sheet, chronology, agreement bundle, performance proof, account reconciliation, dispute matrix, prescription table, notice proof and recoverability note. That is more useful than a folder containing only invoices and increasingly aggressive emails.
Important limitation
This is general information. Contract terms, debtor status, prescription, statutory notices, jurisdiction, evidence, recoverability and costs require matter-specific verification before proceedings begin.
FAQs
Must a small business always send a letter of demand before suing?
Not universally. A contract, statute or procedural route may require notice, and a demand is often useful, but the content and effect depend on the claim. Confirm the governing clause and law before treating a template as mandatory or sufficient.
Does an invoice prove the customer owes the amount?
An invoice records a claimed charge; it does not alone prove contract, authority, performance, acceptance and the balance. Support it with the governing agreement, delivery or service evidence, ledger and payment allocation.
Can I sue the director when the company has not paid?
Not merely because the director represented the company. Personal liability requires its own legal basis, such as a valid suretyship or another established ground. Identify the contracting debtor before naming parties.
Does settlement negotiation interrupt prescription?
Do not assume it does. A particular acknowledgment or judicial process may affect prescription, but ordinary negotiation or a demand does not necessarily do so. Protect the date separately while discussions continue.
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Legal note
This article is general legal information for South African readers. It is not legal advice. Speak to a qualified legal professional about your specific facts before taking action.