Credit & Risk

The debt recovery process for businesses

4 Mins

As a business owner, it is likely that at some point in your career you will come across a customer refusing, or being unable to pay for your goods or services.

B2B payment behaviour throughout Europe has been worsening for some time with many invoices being paid past invoice terms or not at all. 

Small businesses seeking debt recovery is becoming all too common practice for business owners, with many reaching out for help when they have received little to no communication regarding payment of their invoices.

Sending reminder letters is always a good idea even before the payment becomes late. Unfortunately for so many businesses, the problem only becomes apparent when the payment date has been reached with no payment in sight. It is always recommended to businesses that a more proactive approach is taken when it comes to the invoicing process. By continuing communication throughout your customers’ life cycle, you are more likely to be aware of any payments that could come in late or any problems that may arise if you have built up a strong rapport with your client.

Unfortunately, not all businesses have the luxury to chase payments as soon as invoices go out, they may not have enough staff to do this or enough time on their hands. So if you do find yourself in the position of chasing late, unpaid invoices, there is no 100% guarantee of getting your money back, however, there are ways you can try with or without getting the courts involved.

In this blog post, we’ll talk you through the commercial debt recovery process and the options available to you. 

Chapter 1

Reminder letters

If you have sent your invoice and not received payment past the due date, you can start your debt recovery process by sending reminder letters. Ensure to have a paper trail that you have tried to chase your money if this matter should ever go further. 

The reminder letters can be staggered at the beginning, depending on how urgently you need your invoice to be paid.  You should preferably leave a week in between correspondence for the client to respond, however, if you continue to hear nothing back and have not received payment, you can send the letters more frequently. 

Keep a record of your communication efforts as evidence and try different avenues, such as email, post, and telephone. Make sure to date the letters, and reiterate your payment methods and details, as well as your contact numbers for them to get in touch with you directly if they have any issues. 

You're legally entitled to issue statutory interest rates the day the payment is late. This is if you haven't already agreed when the fee will be paid with the customer. If you didn't have an agreed payment term, the law has set a default period of 30 days before you can charge daily interest. You can also claim debt recovery costs with the amount you can charge based on the amount of the overdue invoice.

If you have sent continuous reminder letters with a matter of urgency and still aren’t getting anywhere, it’s time to get a third party involved to help chase your debt for you. 

Chapter 1

A debt collection firm

A debt recovery firm is one of the two options you have when trying to recover a debt. Depending on your budget and how much time you have, this could be the best route. If you choose to instruct a reputable debt recovery firm they will charge a fixed percentage of the debt once it’s recovered. If they are unsuccessful they should be able to advise you if further legal action is a viable way to recover your money. There are usually no upfront costs to instructing an agency to chase the money for you and they can normally begin action immediately.

the debt recovery process for businesses

Debt recovery firms are experts at what they do, and most work on a ‘no-win, no-fee' basis so you will only pay if your debt is recovered. This is a viable way if you need your debt recovered quickly and don't want to pay anything upfront

The second option is to go down the legal route.

Chapter 1

Instructing a solicitor

Instructing a solicitor to chase the debt for you is a harder push at getting your money back. If you have already tried a debt recovery firm with no avail, a solicitor can issue a County Court Judgment (CCJ) against the company which will stay on their company credit report for 6 years if not paid. A CCJ is an order from the court to pay the money a debtor owes. This can be damaging for any business, and would more than likely destroy any relationship you have built up with your client so it’s best to see this as a last resort. 

If you choose to issue legal proceedings, there could be substantial costs involved. Most solicitors will first send a ‘Letter Before Action (LBA) at a fixed cost and if unsuccessful, will then suggest court action.  The aim of instructing a solicitor is to get a County Court Judgment awarded. There could be a hefty wait of a possible 30 weeks to get a hearing in the courts, which could delay your payment further, however, the seriousness of a CCJ is usually successful in retrieving your money, but not always.  Remember, a solicitor can bill you just for their time of looking into your case, even if the money is not recovered. 

Creditsafe’s specially selected partners work on a no-win/no-fee basis to collect your debt for you, visit our website for more information on how we can help you. 

Chapter 1

Issuing a CCJ & Enforcing Judgment

Your solicitor will apply to have a CCJ issued against your debtor on your behalf, and if it’s awarded your debtor’s company credit report will be affected within days. If this court order is still being ignored, you can appeal to the courts to take the debt recovery process to its final stage and enforce the judgment.

There are several ways to do this, which we have detailed in this blog

Chasing late payments and going through the debt recovery process can be a time consuming and expensive exercise for any business owner. Prevention is always better than cure, so ensure you are giving your business the best chance of protection by doing your due diligence on companies you are, or will be deadling with. 


View a company credit report for free today,  and make informed decisions based on trade payment data, key financials, company credit scores & limits plus much more.