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Overdue payments and outstanding debts can be the curse of SMEs, not least when a business is still in its relative infancy. A build-up of unpaid credit or non-payment from customers can create huge problems with cash flow for even a long-standing and well-established business.

It is therefore essential that you understand how best to recover business debts, from the correct procedural aspects to the crucial economic considerations when contemplating taking legal action. In some cases, the recovery of bad debt may cost your business more in terms of time and expense, so you will also need to assess when best to take legal steps and when it’s better to cut your losses.

Free debt review from Three Graces Legal

At Three Graces Legal, we offer a free debt review, with tailored and bespoke solutions to save you time and money and prevent repeat debt in the future. We will work with you, as trusted advisors, to help recovery outstanding debt owed to you, whether this is more than one debt. Get in touch with us today to find out how we can help you chase business debt.

1. Formally request payment

Where payment falls overdue, it's not uncommon for businesses to provide customers with a short period of grace before chasing any debt. A gesture of goodwill of this kind can very often help to maintain a healthy working relationship with a valued customer, so long as this doesn't impact financially on your business. Very often, customers will only be a few days late in making payment, such that the matter can be resolved without any fuss.

Equally, however, there can also be instances where payment has fallen long overdue, and this is now having a noticeable impact on your cash flow. In these circumstances, you may need to take action to recover this money.

Contact the debtor in writing

A tactical and measured approach is initially advisable. As such, your first step should be to contact the customer in writing to highlight the outstanding payment and to politely request that your invoice be satisfied as soon as possible, typically within 7 to 14 days.

Use the telephone if appropriate and necessary

In the event of no response, you may want to contact the customer by phone to ensure that they have received your correspondence. You may also want to resend the invoice by recorded delivery, or email with a read receipt facility, together with a further written request for payment.

If you still don't receive a response, it is always best to keep the lines of communication open, as there may be a perfectly innocent explanation for why the payment hasn't been made and/or an easy solution to the problem. By endeavouring to talk directly to the customer, and to negotiate openly with them, you may be able to resolve the issue without recourse to more formal action.

*TIP* - If you do utilise the telephone as a line of communication then it is always helpful to keep a note of the time, date and contents of the conversation for your records.

2. Send a letter before action

Even where all previous attempts to resolve the matter have failed, you should never issue court proceedings without first forewarning the customer of your intentions. Therefore, you will next need to send a 'letter before action', in other words, a letter explaining that unless payment is received within a specific timeframe, legal action will be taken.

Be firm, concise and unwavering

Although it’s perfectly acceptable to send a letter before action on your own business or company headed paper, by instructing a solicitor to send this on your behalf will demonstrate real intent to formalise matters in the event of non-payment. Your solicitor can set out the precise nature of the legal action that will be taken, together with the costs and other consequences that may ensue from any further failure to settle the debt.

Retain copies of any letters

You should always ensure that you retain copies of any letter before action, and all other previous correspondence, to produce to the court to show that all reasonable steps have been taken to pursue the debt. It is not uncommon for courts to penalise claimants where they have elected to issue court proceedings prematurely, in other words, without first seeking to resolve the matter with the debtor.

Often, however, a pre-action letter will be sufficient to prompt a debtor into payment, without the need for court proceedings, but where this fails, here at Three Graces Legal our specialist debt recovery solicitors can protect the best interests of your business.

3. Issue court proceedings

If a debt remains outstanding following a letter before action, it is open to you to issue court proceedings. However, expert advice should always be sought as to whether this is the right way forward for you and your business.

Assess whether the debtor can pay

It would prove to be a futile exercise to sue someone who does not have the capital or assets against which a judgment sum can be enforced. In other words, can the debtor actually afford to pay? If not, serious consideration should be given as to whether recovery of a debt is worthwhile, or whether that particular payment should be written off altogether. In some instances, however, you may still want to take formal action to send a message to other debtors.

What are the advantages and disadvantages of taking legal action to recover debt?

The legal route is usually one of last resort, but you should not be afraid to use it. By law, where services or goods have been rendered, you are entitled to the money owed, and you should not necessarily be dissuaded from seeking to recover what is owed to you. However, securing the right advice in the context of your business can be crucial in determining the best course of action for you to take, but here are some of the pros and cons:


  • A claim from the county court may force your debtor to take the debt more seriously
  • It is a relatively cost-effective method of pursuing an unpaid invoice, and the fee is recoverable from your debtor
  • There are several ways to enforce the judgement
  • The claim can often prompt the debtor to pay their debt, as they do not want it to impact their ability to get credit and to avoid the hassle of court proceedings.


  • A claim does not necessarily result in payment. A judgement may have to be enforced to receive payment.
  • If the debtor defends the claim, this could lead to complex and ongoing proceedings
  • Enforcement of the judgement is not always successful; for example, the debtor may not have the funds to pay.

If you do decide to pursue the monies owed to you through the Courts then it is imperative that you seek the services of an experienced team of lawyers in order to ensure you recover the original debt amount owed to you.

*TIP* - Do you know under the Late Payment of Commercial Debts (Interest) Act 1998 and Late Payment of Commercial Debts Regulations 2002 & 2013 you can add costs, compensation and interest to the amount you are already owed?

It is open to you to proceedings through the county court. This is a formal process whereby the debtor will be sent a court form requiring them to pay the debt, plus interest and costs.

However, the law relating to debt recovery can at times be complicated, with comprehensive rules as to the correct procedure to follow. Indeed, the prevention of procedural failures is one of the key reasons to instruct a specialist solicitor, to ensure proceedings are dealt with expeditiously and effectively, from issue through to enforcement. 

4. Enforce judgment

Where a county court judgment (CCJ) is successfully secured against a debtor, unfortunately, this does not necessarily mean that payment will be forthcoming. However, what sets Three Graces Legal apart from other debt recovery firms is that we will ensure you get the money owed to you, taking enforcement action after a judgment has been obtained.

Instruct a HCEO

Once a CCJ has been achieved, it is possible to enforce that debt almost immediately. The most common method of enforcement is to instruct a bailiff or high court enforcement officer to attend the address of the debtor and collect the debt or seize goods. That said, there are alternative enforcement methods that can be used depending on the circumstances of the individual case.

Initiate insolvency action

An alternative to issuing a County Court claim is to commence insolvency action. This is a possibility when:

  • The debtor is a company the debt value is above £750
  • The debtor is an individual the debt value is above £5,000
  • The debtor is in England or Wales
  • There is no known dispute over the unpaid debt

Apply for an attachment of earnings order

An attachment of earnings order allows money to be taken from the debtor’s earnings to pay off the debt.

Apply for a third party debt order

Using a third party debt order, money in your debtor’s bank, building society or business account will be frozen, preventing them from accessing it until the court decides if that money can be used to pay the debt.

Apply for a charging order

A charging order can be made against any land or property owned by the debtor. If the debtor sells the land or property before the debt is payed, the charging order will be paid out of the proceeds of the sale.

At Three Graces Legal, our lawyers, will discuss with you the pros and cons of each method of enforcement relating specifically to your case so that we can decide with you the best and quickest avenue of enforcement to recover your money.

5. Prevent business debt from arising

Think about the possible steps which may be taken to minimise the possibility of bad debts.

While the benefit of hindsight is not necessarily the most helpful strategy when faced with chasing mounting business debt, it can help to prevent any further debt from accruing in the future. As such, it is important to ensure that your customers are fully aware of and understand your credit terms from the outset and are openly agreeable to meeting those terms.

Ensure payment terms are clear and visible

In many cases, payment terms will be printed on your invoice. However, wherever possible, it is also sensible to build a direct working relationship with repeat customers, such that you can discuss payment terms openly and more easily reach an amicable agreement where payment is late.

In this way, legal action becomes less likely, protecting that business relationship and encouraging further business for the future.

Why use Three Graces Legal to chase your business debt?

Here at Three Graces Legal, our expert debt recovery lawyers can help you to draft clear terms and conditions, including payment terms, to help prevent non-payment of invoices.

Where debt has already arisen, we can also provide you with strategic advice on how to assess the economic viability of recovering a debt, or several debts, tailored to your circumstances. We will take all the necessary practical steps on your behalf, from letters before action to enforcement proceedings.

Our flexible fee structure allows us to provide value to your business, offering a comprehensive debt recovery service at a minimal cost to you. In this way, we can ease the financial strain of outstanding debt, as well as the cost of recovering that debt on your behalf.

Contact Our Debt Recovery Solicitors

If you are looking to recover outstanding payments, Three Graces Legal is a one-stop solution for debt recovery. We have the expertise to guide you through the entire process, from balancing the recovery of bad debt against the cost of legal action, to issuing court proceedings and enforcing judgment, providing a tailored strategy to work within your budget.

To speak with one of our debt recovery solicitors, call now on 0151 659 1070 or complete our online enquiry form and we will get back to you right away. We look forward to helping you obtain the best possible outcome for you and your business, helping to protect your financial interests every step of the way.

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