In short
How a commercial debt moves from an overdue invoice to a recovered sum, what happens at each stage, and where the decision points sit.
What commercial debt recovery actually involves
Commercial debt recovery is the structured pursuit of a business-to-business debt after ordinary credit control has stopped producing payment. It is a combination of documentary analysis, direct engagement with the debtor and an assessment of what would happen if the matter were escalated.
The word 'chasing' understates it. By the time a specialist is instructed, the debtor has usually already declined to respond to routine chasing. What changes the position is not volume of contact but the credibility of the position being put and the accuracy of the analysis behind it.
Establishing who the debtor is
The first question is which legal entity is liable. Trading names, group structures, changes of company and sole traders operating under business names all cause creditors to pursue the wrong party.
Pursuing the wrong entity wastes time, and in some cases prejudices a later claim. Public records and the contractual documents are used to establish the position before contact.
The documents that matter
A recovery position is only as strong as the paperwork supporting it: the contract or terms of business and evidence that they were incorporated, the purchase order or instruction, evidence of delivery or performance, the invoices, the statement of account and the correspondence history.
Gaps are not fatal, but they should be known before a demand is made rather than discovered when the debtor points them out.
Interest, compensation and recovery costs
For qualifying commercial transactions, the Late Payment of Commercial Debts (Interest) Act 1998 can provide for interest and fixed compensation, and in some circumstances reasonable recovery costs. Contractual terms providing a substantial remedy for late payment can displace that statutory scheme.
Interest should be calculated accurately and claimed only where entitlement is properly established. An overstated demand invites challenge and undermines the credibility of the rest of the claim.
If the debt is disputed
A dispute changes the route, not necessarily the outcome. The task is to establish whether the objection is genuine, whether it is quantified, whether it was raised contemporaneously, and whether it answers the whole of the sum claimed or only part of it.
Where a dispute is genuine and substantial, insolvency routes are not an appropriate tool, and the matter may require negotiation, ADR or determination by a court.
Escalation and the pre-action framework
Before proceedings, the applicable pre-action framework has to be identified. Where a business claims payment from an individual or sole trader, the Pre-Action Protocol for Debt Claims can apply, with prescribed information and a significant 30-day response period. For ordinary company-to-company disputes, the general requirements of the Practice Direction on Pre-Action Conduct and Protocols are usually the relevant framework.
Getting this wrong causes delay and can have costs consequences. The correct framework depends on the parties and the claim.
Recoverability: the question asked too late
Winning a claim and recovering money are separate questions. Before significant expenditure, it is worth assessing the debtor's trading status, filed information at Companies House, any insolvency indicators and known judgments.
Where a debtor has no substance, the commercially correct decision may be to stop, and a good adviser will say so.
Frequently asked
- How long do I have to recover a business debt?
- Limitation periods apply and vary according to the nature of the claim and the documents. Because the position depends on the facts and the contract, it should be checked early rather than assumed.
- Does instructing a recovery specialist end the customer relationship?
- Not necessarily. Where the relationship matters, the strategy can be adapted so that pressure remains credible without being needlessly confrontational.
Sources & references
- Civil Procedure Rules and the Practice Direction on Pre-Action Conduct and Protocols
- Pre-Action Protocol for Debt Claims
- Late Payment of Commercial Debts (Interest) Act 1998
- [INSERT ADDITIONAL VERIFIED SOURCES USED FOR THIS GUIDE]
This guide is general information only and does not constitute legal advice. Procedures described relate principally to England and Wales. Every matter is assessed on its own facts and contractual documentation.