By following the above steps, you can help to avoid unnecessary escalation and position yourself as reasonable and organised to the debtor. However these communications go, it’s important to keep a paper trail from the beginning (save copies of emails, invoices, statements, non-payment explanations etc.) as this can become valuable if you need to escalate later.

If after following all of the above steps you still don’t receive payment, or if the debtor isn’t able to point to a clear contractual issue, you’re likely not just dealing with a normal delay. At this point, it’s more reasonable to consider the account as a genuine ‘non-payment’ and move forward with more formal credit control steps.

When informal reminders and previous efforts to resolve the situation haven’t helped, the next step is to move to putting more formal credit control in writing. It’s important to keep in mind this is a pre-legal solution, and it doesn’t mean being aggressive – it’s simply implementing much clearer, documented and time-bound next steps. This removes ambiguity from the situation for both parties.

There’s no single structure for your written credit control, and it’s not a legal route – but there are a number of things that are common to include and decide upon at this stage:

1. Formally confirm the outstanding balance. If you haven’t already, sending a statement of account which clearly shows what is owed, invoice numbers, original due dates and acceptable methods of payment confirms you’ve removed practical barriers to settlement.
2. Set a clear payment deadline. Up to this point you might have used vague language like “as soon as possible”, but a specific date creates a sense of importance, signals you’re taking the matter seriously and avoids delay loops.
3. Offer two routes forward. It’s important to look reasonable whilst still placing the responsibility on the debtor. The first option is payment in full by the stated deadline, with the second choice of immediate contact to agree a payment plan. Whatever is decided should be confirmed in writing for future evidence.
4. Make an escalation path clear. This isn’t a threat of legal action, but explaining that failing to engage constructively will result in further steps being taken can help you create leverage whilst remaining pre-legal.
5. Handling partial disputes. It’s important to carefully address any disputes should they exist. To avoid unnecessary delays, you can explain that the undisputed portion should still be paid in full whilst other issues will be dealt with separately.

There are some cases where it may be appropriate to suspend services or pause supply. However, you need to be careful before going down this route; it’s only possible where the contract allows it and you want to avoid muddying the situation by giving the debtor valid claims against you.

As before, the most important thing is to continue documenting everything including all correspondence, deadlines given and promises to pay. This process can be very time consuming for businesses not using outsourced credit control services, but it’s important if things need to be escalated further.

In many B2B debt recovery cases, charging statutory interest and late payment compensation on overdue invoices is a legal right. The government’s Late Payment of Commercial Debts Act exists as a tool to discourage late payment and aims to compensate businesses for the time, effort and costs associated with chasing overdue payment that they’re owed.

Put simply, statutory interest is an amount you can add to overdue commercial invoices at 8% above the Bank of England base rate. This interest starts accruing from the day after the original due date of the invoice. The Gov UK page discussing interest on late commercial payments gives you a worked example of how this can be applied.

You can sometimes also add a late payment charge on top of the statutory interest. This amount is a fixed sum that changes depending on the amount of debt, ranging from £40 to £100. The Gov UK page for late payments outlines the specific debt tiers for which each amount applies.

It’s important to note that these additional charges can’t be applied in every situation, so you should involve an expert to help you understand if you’re entitled. For example, your contract may preclude you from charging statutory interest if there was a different interest rate agreed, or if there’s a substantial remedy for late payment already built into the agreement.

If your written credit control efforts haven’t succeeded, sending a Letter Before Action is the next step to consider. This is the first step in potential legal escalation, transitioning away from a simple internal credit control – showing there’s no more informal routes to pursue.

Although more serious than all previous steps, the reason this is still a potential legal escalation is because a Letter Before Action is often sufficient to prompt payment without taking the matter further.

In the context of debt collection, a Letter Before Action (LBA), also known as a Letter Before Claim (LBC), is a formal pre-action notice informing a debtor of exactly what they owe, why they owe it, potential remedies (eg. full payment or meaningful communication), deadline to meet them, and potential consequences or intent to legally escalate should they not be met.

There’s no mandatory template for an LBA, but an effective one is clear, structured and factual. Best examples will normally:

• Identify the parties involved
• Confirm the total owed amount and why it is owed
• List relevant invoice references and original due dates
• Briefly summarise previous steps taken to resolve the issue
• Firm deadline for payment or alternative dispute resolution and clear statement of what will happen next if this isn’t met (eg. initiating court proceedings)
• Supporting documents

This doesn’t have to be in the format of a letter, but that is often the most formal way to send this type of notice. It’s safest to have the help of a lawyer or another professional when drafting your LBA – pitfalls such as exaggerating legal claims or including incorrect threats could harm your case later.

Contrary to the widely held belief, involving a debt collection agency shouldn’t be considered as the ‘last resort’ after considering a debt beyond recovery. In reality, involving experts earlier in the process is a smart commercial decision that often significantly increases the chances of recovery.

You might know it’s the right time to involve debt collection experts if you’re dealing with repeat late payers, longstanding overdue payments with no clear non-payment explanations, or balances large enough that can’t be ignored any longer.

An agency can actually act in many cases as an alternative route of ‘professionally escalating’ the debt at the pre-legal stage, before bringing the claim to court. Bringing in a third party in this way can be beneficial to:

• Elevate urgency to the debtor without initiating legal proceedings
• Help not strain customer relationships further than they already have
• Save time for the business trying to chase the outstanding invoice (especially in small business debt collection cases where there’s no dedicated team to do this)

Good agencies will go above and beyond sending reminder letters, applying their experience to create and manage a personalised escalation process to help maximise your chances of unpaid invoice recovery.

It’s important to find the right, reputable partner who will work in your best interests. At STA for example, we offer transparent pricing, always give open and honest communication, have a 24/7 online dashboard for all clients and offer both pre-legal support and legal escalation through our in-house law firm STA Legal.

After going through all of the previously mentioned processes and options without success, the decision pivots from ‘should I continue chasing?’ to ‘what’s the best way to escalate’.

The next step is to decide the best option of escalating for your situation – there’s a few different solutions that have their own pros and cons, so you’ll need to decide which is most appropriate to maximise recovery likelihood whilst maintaining cost-effectiveness.

The first route is filing a court claim against the debtor. This is a formal process which aims to obtain a judgement that the money is in fact owed, ultimately providing legal confirmation of the debt. At a top level, this process involves issuing a claim, giving the opportunity for the debtor to respond, and then obtaining a judgement should the claim be successful.

Making a court claim is most appropriate in cases where there’s clear documentation of the debt, you’ve taken ample previous steps without clear engagement by the debtor, and you believe the debtor has the means to pay but is choosing not to.

However, this is only the first step towards getting paid; a court judgement like this only confirms you are owed the amount in question by the debtor. Although some do comply by judgements straight away, in reality, many continue to delay payment after this point.

If you’ve made a successful court claim but still haven’t received payment, you may need to take further action to ‘enforce’ the judgement. There are different methods of doing this, and choosing the right one is different for every case, which is why it’s important to get support from a professional.

There’s a lot of nuance that comes with the available options you have to enforce the judgement. At a top level, here are a few of the things you can ask the court to do if you’re not paid following a judgement:

• Find out what the debtor can afford to pay. This involves asking the court to order the debtor to provide evidence of income or spending, at which point you can decide on further action
• Send bailiffs to take control of goods. This is called a ‘warrant of control’, and can escalate to a bailiff visiting the debtor’s business to find assets that may be sold to satisfy the debt. In some cases, payment may be made at this stage to avoid goods being removed.
• Freeze assets or money in an account. Called a ‘third-party debt order’, this allows the court to freeze specific funds that a third party holds for a debtor – commonly funds in a business account at the time of the order. From this point, the court will decide whether it can be used to pay the debt
• Charge the debtor’s land or property. This is called a ‘charging order’, and placing a ‘charge’ on a property owed by the debtor. This usually means that the debtor is unable to sell the property or land without paying off the charge first.

If you’re owed by a limited company and the debt is undisputed, the second option involves escalating towards ‘winding-up’ the debtor’s company. If this option is appropriate for your situation, this option allows you to threaten potential insolvency based action which often results in fast resolution from the debtor.

It’s important to be careful when choosing to apply for a ‘winding-up petition’; it’s far from the first choice in most cases as you must show that the company is unable to pay debts as they come due and take responsibility for expensive court fees. You’ll also have to wait through the time consuming legal process (if your winding-up petition is successful), and be okay with the fact that even if the petition is successful, you might recover little to nothing of the amount you’re owed.

In some cases, escalation in the sense of formal legal action can result in worse outcomes than negotiating a settlement or payment plan. Legal debt collection routes are often lengthy, costly and stressful, and sometimes don’t even end up with you recovering much of the amount owed.

As with any other escalation option, negotiating a settlement or payment plan is situational – it’s often most effective in cases where a debtors’ business is commercially viable but experiencing short-term cashflow issues. At the end of the day, even a structured payment plan that allows you to recover the owed amount over many months may still be quicker and more effective than some of the legal options available.

Should an arrangement be agreed between the parties, it’s very important that what was agreed, amounts, deadlines and non-payment consequences are well documented.

There’s no cut and dry solution to picking the best enforcement option that works for your situation. Ultimately, you’ll need to consider all of the factors in your case; from the amount owed, the debtor circumstances and much more. The best option will be the one that recovers the most money, in the most efficient way possible – not necessarily the one that seems the most aggressive or forcing.

That’s why we wholeheartedly recommend getting in touch with a professional debt recovery agency or other expert who can help guide you through the entire process, from pre-legal communication with the debtor to dealing with the intricacies of legal escalation.

Although standard recovery measures might work in the majority of cases, there are some special situations you need to watch out for which could completely change the approach you need to take. In these cases, going down the normal routes could waste time, money and are unlikely to yield results in recovering your money.

For situations where you’re owed money by a company that’s gone into administration, normal action of recovery is usually paused. In these cases, an administrator has been given control of the business whose job is to try and rescue the company or sell it in such a way to get a better return for creditors.

Depending on the specific situation, you’ll likely need to register your claim with the administrator and wait for further updates instead of being able to chase the amount owed directly. Eventually, any available assets will be distributed in order according to creditor ranking (for example, secured creditors before unsecured creditors).

If a company has officially gone into compulsory liquidation or is insolvent, this typically means the business has failed. Depending on the specific situation and assuming you’re a known creditor of the business, you should receive a report to creditors and you may need to submit a ‘proof of debt’ assuming the company has any assets remaining.

Should the company have any assets that can be sold which more than cover the costs of the insolvency itself and secured creditors, you may then receive some of your money. However this often isn’t the case due to the nature of the situation, and as an unsecured creditor you will likely be one of the last to be paid.

You can find out more about how assets are distributed to creditors on the Gov UK website.

If you’re owed money by a company located outside of the UK, recovery turns into a more complex task. International debt collection can take longer and be more expensive than typical recovery depending on where the debtor’s assets are located and the nature of your contract.

The process you’ll need to go through varies widely depending on the specific circumstances of your case, which is why it’s so important to enlist the help of an agency who specialises in cross-border recovery, such as STA International. The sooner you get in touch, the higher your chances of recovery, so don’t waste time getting help!

Something that not enough businesses consider when it comes to recovering debts is the time factor. Considering limitation periods is key when it comes to considering your debts and escalating them.

Limitation periods are the legal time limit you have to make a claim in order to recover a debt – by failing to bring a claim within the ‘limitation period’, you’re losing some of the legal options to enforce payment from your debtor.

In England and Wales, the limitation period for most types of commercial debts is six years from the date the payment became due (5 years in Scotland). However, in some cases this time limit is reset if you receive formal acknowledgement of the debt or receive a partial payment against the balance. This can sometimes vary depending on the specific circumstances. Although there may be similarities, Northern Ireland is governed by separate legislation so it’s important to check what applies to your specific situation.

This doesn’t always mean you can’t try and recover the debt if that time period has expired; it just means that there are some types of action you can no longer take. It’s always ideal to start the process as soon as possible to maximise recovery.

If you want to avoid the hassle of being owed money, the best way is to prevent being owed in the first place. Of course, this is easier said than done, but there are a number of things you can do through diligent credit control to mitigate the risk of being shouldered with lots of unpaid invoices.

The first way you can help prevent being owed money is before you even open a new business relationship – this might involve carrying out basic checks on new customers, verifying company information where possible and keeping the credit limit low to begin with as you establish trust in the business relationship.

Ensuring your contracts are unambiguous is another effective way to reduce delays and non-payment explanations. Not only will this encourage people to pay without argument to begin with, but it can also help you identify non-payment issues more quickly.

If you’re dealing with a big project, another useful tool is taking a deposit or staged payments. This can significantly reduce the risk of complete non-payment, and ensures you receive at least a portion of the owed amount in case of things going wrong later down the line.

Once you have strong processes in place, issues that arise are far less likely to become bigger problems than they need to be. A combination of monitoring internal processes to ensure invoices are sent out promptly, addressing any problems as early as possible and monitoring behaviour of clients who stretch terms can help to minimise the amount of cases that require escalation to recover significant amounts of owed money.