Supplier Took Your Advance Payment and Did Not Deliver in the Philippines: How to Recover a Prepayment

The first 24 hours: stop payments, preserve records, send a written demand

The order is: stop what has not yet been paid, secure proof of what has, then give the supplier a clear written deadline. Until those three are done, do not argue by phone and do not threaten to call the police.

1. Stop every further payment. Suspend installments that have not yet fallen due. If you issued post-dated checks that have not been encashed, ask your bank about the conditions and procedure for a stop payment order, and keep written grounds for it, because stopping a check without valid reason can create a problem of your own. Freeze other open orders with the same supplier.
2. Secure proof of payment. Bank transfer confirmations, e-wallet transaction records, receipts or invoices issued to you. Look closely at whose name is on the receiving account: a company account or an individual's personal account. That detail decides whom you can pursue later. Where cash was paid without a receipt, have those present write a signed statement while memories are fresh.
3. Secure the communications. Quotations, purchase orders, contracts, and every message on Viber, WhatsApp, WeChat or email about delivery dates, specifications and payment terms. Export full threads rather than a few screenshots, and archive the supplier's phone numbers, social media pages and profile screens, since accounts can disappear overnight.
4. Send a written demand. Use email plus a method that leaves proof of delivery. State the order reference, the amount paid, the agreed delivery date, and a specific date by which goods must be delivered or the money refunded, failing which you will rescind the contract and claim recovery. Keep the wording factual. Every later procedure starts from this letter.

If phones go unanswered and the shop is closed, send someone the same day to the registered address and the actual warehouse to look and take photographs. That visit is evidence in itself.

Verify who the supplier really is: whom you can sue decides what you can recover

Many prepayments are lost not because the case is weak but because the buyer discovers, only after the problem, that he does not know whom to claim against. Before any lawyer's letter goes out, establish the supplier's legal identity.

• Registration. Is the supplier a corporation or a sole proprietor? Corporations are registered with the Securities and Exchange Commission; a sole proprietor registers a business name with the Department of Trade and Industry. Liability differs: a corporation answers with corporate assets, a sole proprietor with all of his personal assets. Compare the registered name, registered address and responsible officer against the names on your contract and receipts.
• Business permit. Ask the city or municipal government where the supplier operates whether a valid business permit exists. No permit, or an address that does not match, suggests the operation was irregular from the start, which matters later when deceit has to be shown.
• The receiving account. Did the money go to a corporate account, or to the personal account of the owner, a salesperson or a third party? Whoever received it personally can be pursued personally.
• The person you dealt with. The owner, an authorized employee, or someone presenting himself as an agent. A middleman who collected the money and never passed it to the factory is another familiar pattern; in that case your claim is against the middleman, and the factory may truly have received nothing. How to guard against this is covered in choosing a sourcing agent.
• Asset leads. Warehouses, vehicles, shops, other customers. Knowing what the supplier owns tells you whether a judgment would have anything to attach to.

If the checks show that the company does not exist, the name was borrowed or the address is false, the matter has moved from breach to fraud, and the sequence in what to do after being scammed in the Philippines applies instead.

The recovery routes: demand, mediation, small claims, ordinary action

Where the supplier is still reachable and is simply not delivering or refunding, the route is civil. Which one depends mainly on the amount and on what kind of party the supplier is.

• Formal demand and rescission. If the deadline in your written demand passes without performance, send a notice that clearly rescinds the contract and requires the return of the advance. A demand letter issued by a lawyer carries more weight, and many suppliers respond at this point with a partial refund or a delivery schedule. See how demand letters work.
• Barangay conciliation. Disputes between individuals who live in the same city or municipality generally have to pass through barangay conciliation before a court case. Where one side is a corporation, that step ordinarily does not apply. The system is described in the barangay mediation guide.
• Small claims. A pure claim for the return of money within the small claims ceiling can use the simplified procedure: no lawyer appears at the hearing, the case is filed on standard forms, and it moves far faster than ordinary litigation. The ceiling and the rules are set by the Supreme Court and change from time to time; see how small claims court works. A corporate claimant needs a document authorizing its representative.
• Ordinary civil action. Above the ceiling, or where you claim damages beyond the refund, the ordinary procedure applies. Preliminary attachment can be requested alongside it, provided you can show signs that the defendant is disposing of assets. Time and cost are substantially higher.
• Arbitration. If the contract has an arbitration clause, follow it.

A comparison of these routes is in how contract disputes are resolved. One reality: winning produces a judgment, and a judgment against a supplier with nothing in his name does not turn into money; see when the losing party does not comply. Look at the asset leads from the previous section before deciding whether the case is worth filing.

Breach or fraud: why the police tell you this is a civil matter

Taking payment and failing to deliver is not, by itself, a crime. It is a breach of contract. For fraud, the essential element is that the supplier was deceiving you at or before the moment you paid. Where that line falls decides whether a criminal complaint goes anywhere.

Closer to breach: a real supplier with a real business who has delivered before and cannot deliver this time because raw material prices rose, cash ran short or the factory had trouble; one who keeps replying, admits the goods are owed and keeps moving the date. Police and prosecutors generally do not treat this as criminal.

Closer to fraud:

• a false identity, another company's name, or forged registration papers and permits used to win your trust;
• a warehouse, stock or factory shown to you that never belonged to him;
• the same goods sold to several buyers at once, with an advance collected from each;
• contact cut immediately after payment, accounts deleted, premises vacated;
• payment directed to a personal account unconnected with the company and moved on at once.

These facts have to be supported by evidence rather than inference. The more material you hold showing that the deal was false from the outset, the more likely a criminal complaint is to be taken up.

If the supplier gave you a refund check and it bounced, that opens a separate line; see what to do when a check you received bounces.

Sequence for a criminal complaint: record the incident at the local police station, then file a complaint with the prosecutor's office with complete documents; the prosecutor decides whether to proceed. Where the supplier was found through an online platform or social media and paid online, see reporting online fraud for preserving electronic evidence. Civil and criminal can run together, but criminal process is slow and works mainly as pressure. Do not count on it to collect the money for you.

What not to do while you are chasing the money

Losing the money is bad enough. Do not add the status of respondent to it.

• Removing goods from his premises to cover the debt. Stock in the supplier's warehouse, even the very batch you ordered, is not yours until it is delivered. Taking it without his consent or a court order can lead to a theft or coercion complaint. If goods are to be taken in settlement, a written agreement signed by the supplier is required first.
• Holding people, vehicles or documents. Keeping the supplier's salesperson or driver until the owner comes to pay is a serious criminal matter.
• Exposing him on social media or in trade groups. Libel is a criminal offense in the Philippines and is treated more severely online. You may privately warn business contacts, but public naming and posting identity documents puts the risk on your side.
• Sending informal collectors. If people you hired to apply pressure are reported to the police, the person who hired them is the first one answerable.
• Paying someone who says he can get the money back. This is the usual opening of a second scam. A legitimate lawyer works under a written engagement and does not ask for money to smooth things over.
• Paying more to release the goods. A request for one further payment before shipment is a standard escalation tactic. Until the first payment has produced some delivery, do not make a second.
• Tidying the books. Recording the advance as purchase cost or expense so the accounts look clean. Spending without a compliant invoice and proof of delivery does not stand up for tax purposes anyway, and it erases the trail you need to prove the loss.

Watch the clock as well. Contract claims prescribe, and the longer you wait the more the evidence scatters and the supplier's assets shrink. When the demand deadline passes, make a decision instead of waiting indefinitely for next week.

The accounting if the money is gone, and how to pay next time

Deal with the books while you pursue the supplier: an advance left sitting in the accounts is not deductible and will be questioned at audit. An undelivered prepayment is an asset in the nature of a receivable, not an expense. Treating it as a bad debt loss is subject to conditions for tax purposes. Generally the company has to show that genuine collection efforts were made and that the amount is truly uncollectible; demand letters, court filings and proof that the supplier has vanished or has no assets all serve as support. The precise requirements follow the Bureau of Internal Revenue's current rules and are a matter for your accountant. This is why the demand and filing documents are worth preparing even when recovery looks unlikely.

How to pay next time:

• Verify before paying: registration papers, business permit and the name on the receiving account must match, and the account must be a corporate one.
• Keep the advance small and pay by milestone: deposit, inspection, shipment, arrival, each tied to a document you can check.
• Start with a small trial order and inspect the factory and goods yourself or through a third party.
• Put it in the contract: delivery date, consequences of delay, grounds for rescission, refund period, dispute resolution; signed by someone with authority, not a sales representative.
• Insist on an official invoice: a supplier who takes money but will not issue a compliant invoice is a warning sign in himself.

Bring in professional help when: the amount exceeds the small claims ceiling; there are signs of asset transfers and attachment is needed; several buyers have been hit by the same supplier; or your own customers are now claiming against you because you cannot deliver.

If you want help checking a supplier's registration, organizing payment and correspondence evidence, preparing demand and filing documents with counsel, and handling the accounting and tax treatment of the advance, that is our compliance retainer service. Yixing International Travel Agency is a Chinese-language business consultancy registered in Makati, Philippines, holding SEC registration CS202009551, BI Accreditation No. CA-202624381-1 valid to 2027-06-30, DOLE accreditation and PRA accreditation. We are not affiliated with any government agency, we are not a law firm, and we promise no recovery outcome. General process information only, not legal advice; consult a licensed Philippine lawyer on your case.