Regardless of whether you are a sole trader, SME or even a large business, chasing unpaid invoices is a pain. It is time-consuming, bad for cash flow and can be very stressful. You do, however, have several options available to you when a customer or client fails to pay their invoice. You should seek to recover what is owed to you sooner rather than later.
When recovering a debt, the quickest and often most successful step is to contact the debtor directly. A debtor is a name given to the individual or business that owes you money. You are the creditor. You should speak with the debtor directly and try to informally agree on getting the invoice paid. Perhaps you would be willing to set up a payment plan?
If that fails to work, you should write to them to explain how much the invoice is for, why they owe it and the steps you have taken to have it paid. You should also include copies of statements, payment approval and anything else that highlights that the debtor agrees that the debt is owed. You should request that they pay the invoice within a reasonable timeframe of receiving the letter – this is usually 7-14 days. You should inform them that if they do not respond that you will regrettably have to instruct a solicitor.
You should avoid getting drawn into any arguments with the debtor.
When it appears unlikely that you will receive the monies you are owed, you should speak with a debt recovery solicitor. A solicitor may carry out certain checks and searches on the debtor and may be able to advise you as to whether or not the debtor is worth pursuing. It is always of benefit to have searches carried out at an early stage as it may save you unnecessary legal expenditure should the debtor be unable to satisfy their debts.
A simple letter from a solicitor that shows your willingness to pursue legal action if the recipient does not pay their debt to you might be enough to encourage payment. The letter would explain what actions may be taken next which is usually that legal proceedings will be issued. As the losing side may have to pay the other side’s legal fees, it could leave the debtor even worse off than had they paid the invoice in the first instance. For this reason, an initial letter from the solicitor may be enough to ensure payment is made at an early stage.
If you have exhausted all other avenues, and payment has still not been made, then you may have to issue court proceedings.
We are experts in debt recovery, including instances where that debt is for an unpaid invoice that you issued. You can learn more about our services at Debt Recovery.
If the value of the invoice is below £5,000, you can pursue the matter through the Small Claims Court. You can choose to instruct a solicitor if you wish but the Small Claims Court is designed so that you can represent yourself. It should be noted that you are unable to recover legal fees in the Small Claims court, even if successful.
If the value of the unpaid invoice(s) is below £30,000 the case will be dealt with in the County Court whereas if the value of the unpaid invoice(s) exceeds £30,000, the case will be dealt with in the High Court. Your solicitor would build your case and assist you through the proceedings. If you are successful, there is a strong likelihood that the Judge would require the debtor to also cover your legal fees.
In many situations the Debtor will not fight your claim and you will be entitled to obtain a Judgment against the Debtor. If they do not object to your claim, then the application for Judgment is a paper exercise.
If a Judge rules in your favour, you will have a Judgment against the Debtor. The Debtor should then pay the sum owed. If they do not pay the sum you have been awarded then you can enforce the Judgment through the Enforcement of Judgments Office (EJO).
We can advise you at all stages of debt recovery and inform you at an early stage of the procedure, costs and likelihood of success.
We recognise that it is sometimes important for you to maintain good commercial relationships with debtors and we can deal with these matters with the required sensitivity and tact. In other instances, you may require a more forceful approach. We will be guided by you.
If you are struggling to collect an unpaid invoice, visit Debt Recovery to learn more about our services or contact us directly for a free initial consultation.
