Unpaid invoices. The term is something all business owners have experienced at some point. But it doesn’t make it less unsettling and frustrating.

There are several steps you can take to try to recover the outstanding payments.

Here is a general guide on how to handle business disputes over unpaid invoices:

1. Review the Contract/Terms of Business

Start by reviewing the contract or terms of business you had with the client. This will outline the agreed payment terms, late payment penalties, and any dispute resolution procedures.

2. Send a Polite Reminder

If the invoice is just past due, send a polite reminder requesting payment within a set timeframe (e.g. 7-14 days). This gives the client an opportunity to pay or explain any issues.

3. Issue a Letter Before Action

If the reminder is unsuccessful, send a formal “Letter Before Action” demanding payment and making it clear you intend to take further legal action if they do not pay within a specified period (usually 7-14 days).

4. Consider Mediation/Negotiation

Attempt to resolve the dispute through mediation or negotiation, which can help preserve the business relationship. Often you can recover at least a portion of the debt.

5. Statutory Demand

For debts over a certain threshold (£5,000 for individuals, £750 for companies), you can issue a statutory demand giving the debtor 21 days to pay before you can commence insolvency proceedings.

6. Small Claims Court

For debts under £10,000, you can make a claim through the small claims court/county court. This is a relatively inexpensive process you can handle yourself without a solicitor.

Above £10,000 a claim is through the County Court and anything over £100,000 is usually in the High Court.

All claims can be commenced via Money Claims Online or via a debt collection solicitor.

9. Court Judgment

If the matter is not defended at Court, you will obtain a county court judgment (CCJ) against the debtor. This strengthens your position for enforcing repayment.

Next steps

You have many options for collecting payment, but sometimes none are successful, leaving you with an unpaid invoice. In such cases, you should write off the invoice to ensure your accounts accurately reflect the lost income. This is particularly crucial if you have already paid tax on the anticipated income. Writing off the invoice allows you to reclaim the tax.

The key is recovering monies from unpaid invoices is to act promptly, keep clear records of all communications and amounts owed, and follow the proper legal procedures.

Seeking professional legal advice can also help ensure you take the correct steps to recover the debt owed. Get in touch today for my help.