How to

Effectively recover your business debts

Jenna Keir-Kendrew Solicitor, Dispute Resolution team

The pursuit of outstanding debts can become a significant and timeconsuming distraction when running a business, particularly for SMEs who may not have the credit control resources or cash reserves of their larger counterparts.

Clearly, ignoring outstanding or overdue payments isn’t an advisable business strategy. So, what is the best way to tackle these bad debts and how can you ensure that your business gets paid within a reasonable time every time?

1. Be proactive, not reactive

The best tip I can give to any business owner who is worried about overdue bills is to stay ahead of the problem. Do your research and make sure you know exactly who you’re dealing with before taking on any work. Do they have an established reputation? Have you carried out a credit risk assessment?

2. Review your policies and procedures

Again, this is about avoiding the problem before it arises, but I can’t stress enough how important it is for every business to have a robust set of terms and conditions and a comprehensive credit policy in place. A good lawyer will be able to work with you to ensure that your current documentation is fit for purpose and suggest any amendments that may be required.

3. Get the facts

Even with all of the groundwork in place, there will still be occasions where debts become overdue. The first step in recovering this debt is to work out exactly what it is that’s stopping you from getting paid. Were your payment terms clear and visible? Have you included a Purchase Order where one is asked for? Are they having staffing issues and the invoice hasn’t reached the person authorised to pay it? There could be any number of reasons why you are waiting for payment. Be sure to take a moment to consider them all before you consider your next steps.

4. Act quickly

If, after you’ve eliminated all of the other possibilities, it is clear that your client or customer is having difficulty paying, take immediate action. The longer you delay, the more your client and customers will think they can get away with late payment and, as a general rule, the longer an invoice is overdue, the less likely you are to ultimately recover the debt. Send outstanding invoice reminders, charge interest on any late payments (assuming your terms and conditions allow you to do so) and – if all else fails – speak with a trusted lawyer to discuss whether it would be appropriate to commence legal proceedings.

Prior to any legal proceedings being issued, a Letter Before Action must first be sent to the debtor, requesting payment of the outstanding debt and warning of the imminent issue of a court claim. It is often the case that this letter is sufficient to make the client or customer to take the debt seriously.

5. Is it worth it?

Not all debts are worth pursuing. In some cases, the recovery of bad debt may cost your business more in terms of time and energy than you stand to gain in cash, so it is important to carefully consider whether it is in your best interests to take legal action or whether it would be better to just cut your losses.

It is also important to remember that legal proceedings do not necessarily result in payment. Even if a Judgment is obtained, this may have to be enforced if the debtor still does not pay.

And, of course, if the funds simply aren’t available to cover the outstanding debt, the enforcement may not be successful.

If you do decide to pursue matters through the Courts then it is imperative that you take appropriate legal advice to ensure you recover the full amount owed to you.

Based on a strong understanding of the practical realities of business, with a focus on providing proportionate and common-sense solutions, our Dispute Resolution team are a safe pair of hands to recover debt owed to both commercial and private clients.

For further information or guidance on any of the issues covered in this article – or for specialist advice on your own debt recovery procedures – please contact

Jenna Keir-Kendrew by email at jek@swinburnemaddison.co.uk or by phone on 0191 384 2441.