By Paragon Credit Management | Last reviewed: October 2026

When a customer doesn’t pay, the cost goes beyond the invoice. Cash is tied up, your team loses time chasing, and your own suppliers and staff still need paying. This guide explains, step by step, how UK businesses can recover unpaid commercial invoices: what to do in the first days, your legal right to interest, when to send a letter before action, how County Court Judgments (CCJs) and enforcement work, and when to bring in a professional.

Key takeaways

Act early. The longer an invoice stays unpaid, the harder it usually is to recover.
Keep clear records: the contract or terms, the invoice, proof of delivery and every message with the customer.
Between UK businesses you can usually claim statutory interest of 8% above the Bank of England base rate, plus fixed compensation of £40, £70 or £100 per invoice.
A formal letter before action is the normal step before going to court.
A CCJ is not payment. If a debtor ignores it, enforcement options include bailiffs, third party debt orders, charging orders and High Court enforcement.
Most simple contract debts must be pursued within six years.
A debt recovery company can take over the chasing and escalate the case for you.

What is commercial debt recovery?

Quick answer: Commercial debt recovery is the process of getting paid money that one business owes another, usually for unpaid invoices for goods or services. It runs from friendly reminders, through formal demands, to court action and enforcement.

It covers business-to-business (B2B) debts such as unpaid invoices, overdue accounts, trade debts, unpaid professional fees, commercial rent arrears and unpaid judgments. Business debts follow different rules and procedures from consumer debts, so the route to recovery is different too.

What should you do when an invoice becomes overdue?

Quick answer: Contact the customer promptly, confirm the invoice is correct, ask for a specific payment date and record every contact. Early, polite follow-up resolves many overdue invoices without escalation.

In the first week:

Check the invoice: correct company name and address, correct purchase order number, correct amount and the right contact.
Check the agreed payment date and whether anything is outstanding on your side, such as a missing delivery note or sign-off.
Send a friendly reminder by email, then follow up by phone.
Ask for a firm payment date and method, and confirm it in writing.

Start gathering your evidence now. You will need it if the debt escalates:

The contract, quote, purchase order or signed terms of business
The invoice and any statements
Proof of delivery, completion or timesheets
All emails, letters and notes of phone calls with the customer
Any written acknowledgement that the money is owed, or any part-payment

How do you recover an unpaid business invoice, step by step?

Quick answer: Check the facts, remind the customer, agree a payment date, send a formal demand, send a letter before action, then issue a court claim and enforce any judgment if the debt is still unpaid.

Check the facts. Make sure the invoice is accurate, the work or goods were delivered as agreed, and you know who the legal debtor is (for example a limited company, a sole trader or a partnership).
Send a polite reminder. Many late payments are simple administrative delays.
Phone and agree a date. Speak to someone with authority to pay, and confirm what was said by email.
Send a formal demand. State the amount, the invoice details and a deadline, and refer to your right to statutory interest and compensation.
Send a letter before action. This is the final warning before court proceedings (more on this below).
Trace and check the debtor. Look at Companies House, the Gazette and credit information. If the debtor has moved or gone quiet, tracing may be needed.
Issue a court claim. If the debt is undisputed and unpaid, you can ask the County Court to make a judgment.
Enforce the judgment. If the debtor still doesn’t pay, use an enforcement method suited to their assets.

An example recovery timeline

When	Typical action
Due date to day 7	Friendly reminder email and phone call
Days 7 to 14	Follow-up call, send a statement and agree a payment date
Days 14 to 30	Formal demand, mentioning statutory interest and compensation
Days 30 to 45	Letter before action (usually allowing 14 days to respond)
Days 45 to 60 and beyond	Issue a court claim if unpaid
After judgment	Enforcement if still unpaid

These timings are a guide only. For larger debts, or where a customer looks financially unstable, act sooner.

Can you charge interest and compensation on late commercial invoices?

Quick answer: Yes. Under the Late Payment of Commercial Debts (Interest) Act 1998, businesses can usually claim interest at 8% above the Bank of England base rate on late B2B invoices, plus fixed compensation of £40, £70 or £100 per invoice and, in some cases, reasonable recovery costs.

Size of the debt	Fixed compensation per invoice
Under £1,000	£40
£1,000 to £9,999.99	£70
£10,000 or more	£100

How it works in practice:

Interest is simple (not compound) and builds up daily.
It usually runs from the day after the agreed payment date. If no date is agreed, it generally starts 30 days after the invoice is received or the goods or services are delivered.
The base rate used is the Bank of England base rate on 30 June (for debts that become late between 1 July and 31 December) or on 31 December (for debts that become late between 1 January and 30 June).
You generally don’t need a late payment clause in your terms for the statutory right to apply.

Illustrative example: Suppose a £5,000 invoice is overdue and the relevant base rate is 4%. The statutory rate is 12% a year, which is £600 a year, or about £1.64 a day. You could add £70 fixed compensation. (Use the actual base rate for your debt, as the figure above is only an example.)

There are limits. The Act applies to B2B contracts for goods and services, not consumers. A contract can replace statutory interest if it provides a substantial remedy for late payment. The government has also proposed further changes to commercial payment rules, so check the current position before relying on any figures. You can read our overview in Late Payment Rules in the UK 2026.

What is a letter before action?

Quick answer: A letter before action is a formal letter telling the debtor what is owed and that you will start court proceedings if it isn’t paid by a stated date. Courts expect you to send one before issuing a claim.

A good letter before action includes:

The full legal names and addresses of both parties
The amount owed, with invoice numbers and dates
The basis of the claim, such as the contract or terms
Statutory interest and compensation, if you are claiming them
A clear deadline (commonly 14 days for a business debtor)
How to pay and how to dispute the debt
A statement that you will issue proceedings if payment isn’t received
Copies of the key documents

If the debtor is a sole trader or individual, more detailed pre-action rules apply, including a longer response period. Get advice on the right letter for your case.

What if the customer disputes the invoice?

Quick answer: Ask the customer to explain the dispute in writing, check your records and separate the disputed part from any undisputed balance. A genuine dispute may need negotiation, mediation or legal advice before court action.

Common disputes include quality or delivery problems, disagreements over price, no signed terms of business, and set-off claims. To handle a dispute:

Respond promptly and in writing.
Ask the customer to pay any amount they accept is owed.
Collect evidence that you performed the contract.
Consider a sensible settlement if it avoids cost and delay.
Avoid threats you can’t or won’t carry out.

How does a County Court Judgment (CCJ) work?

Quick answer: A CCJ is a court order, made after a claim, that confirms a debtor owes money. It is not payment. It can be obtained when a debtor ignores a claim or loses a defended case.

The process usually runs like this:

You issue a claim in the County Court, often online for fixed-sum claims.
The debtor typically has 14 days to respond, which can extend to 28 days if they acknowledge the claim.
If they don’t respond, you can ask for judgment in default. If they defend, the court decides how the case proceeds.
Court fees and fixed costs are normally added to the claim. You may recover them from the debtor, but this is not guaranteed.

You can read more in our guide to how to enforce a CCJ.

What can you do if a debtor ignores a CCJ?

Quick answer: You can enforce the judgment. The main options are a warrant of control, High Court enforcement, a third party debt order, a charging order and, for individuals, attachment of earnings. The right choice depends on the debtor’s assets.

Method	What it does	Often suited to
Warrant of control (County Court bailiffs)	Authorises bailiffs to take and sell goods	Debtors with saleable goods or equipment
High Court enforcement (writ of control)	Transfers an eligible judgment to the High Court for enforcement by a High Court Enforcement Officer	Eligible judgments where faster action is needed
Third party debt order	Freezes money held in the debtor’s bank account	Debtors with known bank accounts
Charging order	Secures the debt against land or property	Debtors who own property
Attachment of earnings	Takes deductions from wages	Individual employees, not companies

Before choosing, find out what the debtor owns, where they bank and whether they have other creditors. Debtor tracing and asset reports can help here. For more detail see judgment enforcement.

Should you use a statutory demand or a winding-up petition?

Quick answer: For a company, a statutory demand (for an undisputed debt over £750) can be a strong pressure tool, but misusing it can lead to costs orders. Take legal advice before using it.

If the debtor is a company and the debt is not genuinely disputed, an unpaid statutory demand can be the basis of a winding-up petition. But courts take a dim view of petitions used to pressure someone over a genuinely disputed debt, and the process may not result in payment if the company has few assets. Treat it as a legal step, not a shortcut.

What happens if the debtor is insolvent?

Quick answer: Your options change. If a company is in administration or liquidation, you generally can’t pursue an ordinary claim directly. You usually register as an unsecured creditor, and recovery may be partial.

Check Companies House and the Gazette for insolvency notices.
Act early, before a struggling customer’s other creditors do.
Review whether you have a personal guarantee, retention of title or other security.
Get advice before taking any action once insolvency has started.

How long do you have to recover a debt?

Quick answer: For most simple contract debts you have six years from the date the debt became due. The period is 12 years where the contract is a deed. The clock can restart in some situations, such as a written acknowledgement of the debt.

Don’t leave it late. Evidence fades, staff move on and customers can become insolvent. Different time limits also apply to enforcing a judgment, and after a number of years you may need the court’s permission, so don’t sit on an unpaid CCJ.

Should you use a debt recovery company or a solicitor?

Quick answer: A debt recovery company is usually the better first step for straightforward unpaid invoices where you want the chasing handled and escalation available. A solicitor is better suited to disputed, complex or high-value claims, or insolvency issues. Many businesses use both.

	Doing it yourself	Debt recovery company	Solicitor
Cost	Staff time and court fees	Often success-based	Usually hourly or fixed fees
Best for	Small debts and cooperative customers	Undisputed unpaid invoices and overdue accounts	Disputes, complex cases and insolvency
Escalation	You manage it	Typically includes tracing, legal escalation and enforcement	Full legal advice and litigation
Customer relationship	Direct but can be awkward	Third party takes the pressure	More formal

How much does debt recovery cost?

Quick answer: It depends on the route. Doing it yourself costs staff time plus court fees. Many debt recovery companies work on a success basis, and solicitors usually charge for their time.

At Paragon, there is no upfront fee to instruct us and we charge a 15% commission on money we successfully recover. If we don’t recover, you don’t pay our commission. If a case needs legal action or enforcement, the court, solicitor and enforcement costs are agreed with you in writing first. See our Client FAQs for full details.

How can you prevent late payment?

Quick answer: Check customers before you supply them, agree clear written terms, invoice accurately and promptly, and follow up the day an invoice becomes overdue.

Credit-check new customers and set credit limits.
Put payment terms in writing, including the due date and late payment interest.
Get your terms of business accepted or signed before work starts.
Use deposits or staged payments for larger jobs.
Ask for personal guarantees where the risk justifies it.
Invoice promptly, with the right purchase order number and contact.
Send a reminder on the due date, not weeks later.
Monitor aged debts every week and review customers who pay slowly.
Keep all communication in writing, or confirmed in writing.

How can Paragon help?

Paragon Credit Management provides commercial debt recovery for businesses across the UK. We take over the chasing of unpaid invoices and overdue accounts, keep you informed and escalate where needed, while protecting your commercial relationships wherever possible.

No collection, no fee. Submit your debt for a free review.

Debt recovery FAQs

What is the first step to recover an unpaid business invoice? Check the invoice is correct, then contact the customer to confirm the payment date. Record every conversation and gather your contract, invoice and proof of delivery.

How long should I wait before using a debt recovery company? There is no fixed rule. Many businesses pass on a debt after reminders and a formal demand have failed, often around 30 days overdue. Act sooner if the customer is avoiding contact or may be in financial difficulty.

Can I charge interest on a late business invoice? Usually yes. Under the Late Payment of Commercial Debts (Interest) Act 1998 you can claim interest at 8% above the Bank of England base rate, plus fixed compensation of £40, £70 or £100 per invoice.

Do I need a solicitor to recover a business debt? Not always. Many undisputed debts are recovered without one. A solicitor is more useful for disputes, complex contracts or insolvency, and Paragon can refer matters to its solicitor network where court action is needed.

Can I recover a debt from a limited company? Yes. A limited company is a separate legal entity, so the claim is against the company. Directors are not usually personally liable unless they gave a personal guarantee or there are other grounds.

Can I recover a debt from a sole trader? Yes. A sole trader is personally liable for the business’s debts, and additional pre-action rules apply when the debtor is an individual.

Can I recover a debt without going to court? Often, yes. Many commercial debts are resolved by reminders, formal demands and negotiation. Court is normally the last resort.

What if the debtor has moved or gone quiet? A tracing service can find current addresses, contact details and assets so recovery can continue.

What does a CCJ do if the debtor doesn’t pay? A CCJ confirms the debt, but you still have to enforce it. Enforcement can include bailiffs, bank account freezes, charging orders and High Court enforcement.

Important information

This guide is general information for businesses and is not legal advice. Laws, court fees and procedures change, and every case is different. For advice on your specific circumstances, speak to a solicitor.

Debt Recovery Guide for Businesses: How to Recover Unpaid Invoices in the UK