Late or unpaid invoices are one of the most common and frustrating problems businesses face. Whether you are a sole trader chasing a single overdue payment or a company dealing with a client who has simply gone silent, the impact on your cash flow can be serious. Knowing your options – and acting early – makes a significant difference to the outcome.
Start with your contract and invoice terms
Before taking any action, check what your contract says. A well-drafted contract should specify payment terms, what happens if payment is late, and whether you are entitled to charge interest. If your terms include a right to charge statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998, you can add this to the amount owed.
If you do not have a written contract in place, you can still pursue the debt – but it is a useful prompt to get proper terms drafted before you take on your next client.
Send a formal letter before action
Before issuing court proceedings, you are expected to send a formal letter before action (also called a letter before claim). This sets out the amount owed, gives the other party a deadline to pay (usually 14 days), and warns that court proceedings will follow if payment is not received.
A letter before action from a solicitor carries considerably more weight than a reminder from you directly. Many debts are resolved at this stage without the need to go further.
Consider court proceedings
If the letter before action does not produce payment, you can issue a claim through the courts. For debts up to £10,000, the Small Claims track is designed to be relatively straightforward and cost-effective. For larger amounts, the process is more formal and legal advice becomes increasingly important.
Obtaining a county court judgment (CCJ) against the debtor is often enough to prompt payment. If it is not, there are enforcement options available, including instructing bailiffs, applying for a charging order against property, or an attachment of earnings order.
What about winding up a company that owes you money?
If the debtor is a limited company and the debt is over £750, you may be able to serve a statutory demand and, if unpaid, petition to wind up the company. This is a serious step and should not be taken without legal advice, but the threat alone can sometimes be enough to secure payment from a company that has the means to pay but is choosing not to.
Prevention is better than cure
The best protection against bad debt is putting the right systems in place before problems arise:
- Use clear, written contracts with unambiguous payment terms
- Invoice promptly and follow up as soon as payment becomes overdue
- Consider requesting a deposit or staged payments for larger projects
- Run credit checks on new clients where the contract value justifies it
- Take legal advice on your standard terms if you have not reviewed them recently
Speak to an Oxford business law solicitor
At Challenor Gardiner we advise Oxford businesses on debt recovery and commercial disputes, from sending letters before action to issuing court proceedings and enforcement. We offer practical, cost-conscious advice and will always give you a clear view of your options before recommending a course of action.
Call us on 01865 721451, email info@challenor-gardiner.co.uk or contact us online.
