Customer is refusing to pay/Bad Debt Collection

Has your CEO spoken with his counter-part? In the alternative, have the CFO's or the General Counsel's interfaced?

For the most part, going the Collection Agency route will cost you points on the invoice; plus usually a lower negotiated price. You can do that yourself and save the points.

Law suits will cost (at least here in New York) a minimum of $50K and in my experience most often the suit is settled out of court. If the C-Suite acted un-emotionally, they would have settled their difference and saved most if not all that legal bill. When the suit doesn't get settled, it drags on for years.

Talking does wonders, especially if without emotion. An arbitrator (assuming its not binding) might be a good alternative to lawyers.

A "collection agency" is not typically the party you would choose to pursue claims like this. Although it's a clear-cut situation from your perspective, a disinterested party could perceive something more like "he said, she said." Written documentation, supported by contemporaneous customer acknowledgement of your company's recommendations and suggestions, will be key. The client's perception and recollection of the prior conversations may differ from that of your people, there could have been employee turnover, the people who made the decisions may not have gotten appropriate approval at the time or may now want to shift blame, etc.

As suggested, try the high-level interface first. There may be things the client wants to say and that is the way to find out. Lawsuits cost $$$ even if you win but sometimes the threat of such action is necessary to collect. Your CEO is right to be concerned about the long-term implications of a pursuing a legal claim but I have almost never seen things like this offset in future deals. Potentially offsetting that is an issue of what message this sends to customers and prospects about the quality of your company's work as well as your willingness to be "walked on" by a customer for a matter that is material in size. A customer that does not pay is not a good customer, regardless of how much is purchased, and is deservedly suspect in any future dealings. Ultimately, you either write it off, settle for an agreed amount, try to recover the money in some future (currently non-existent and perhaps never-to-materialize) deals, arbitrate or sue.

I agree with the comments and options previously mentioned. Yes, communication is absolutely necessary. And, for the amount you are trying to recover ($1.2M), I am also curious if your CFO has had any communication with his counterpart at the firm? It is essential that the reasons for non payments, some have been mentioned, but in addition, a business slow down for them, cash flow issues, and yes, even staff turn-over, that information needs to be understood by your company. I believe that consulting counsel is wise to review the contract and continue to explore potential remedies to the issue. Perhaps if this company receives a letter or notification from your counsel, they will take notice, and it may result in better communication. You indicated that your CEO is reluctant to take aggressive action due to doing business in the future with this firm? If a company engages in a business deal and then violates the terms of the contract/agreement and defaults on payments (especially a deal at $1.2M), they are no longer a customer.