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Cash flow is the lifeblood of every business. When customers fail to pay invoices on time, the financial strain can be significant, particularly for small and medium-sized enterprises (SMEs).
Late payment of invoices remains one of the most common challenges facing businesses in the UK.
According to the Government’s official statistics, one in 186 companies on the Companies House effective register entered insolvency between 1 November 2023 and 31 October 2024.
For many, cash flow issues are a leading cause.
Timely and effective debt recovery is, therefore, important for safeguarding the future of your business.
Yet recovering debts is not always straightforward and can be fraught with legal and practical challenges.
Practical steps to recover debts
For some businesses, the thought of engaging a solicitor to recover unpaid invoices raises concerns about escalating costs or damaging relationships.
However, early legal intervention can often save both time and money.
A formal letter from a solicitor frequently demonstrates to a debtor that you are serious about pursuing the matter, prompting them to take action.
In many cases, this step alone leads to payment, avoiding further legal proceedings.
You may also wish to take the following steps as part of your debt recovery process:
- Contact your debtor directly and remind them of their legal obligation to pay.
- Set clear payment terms and follow up promptly when payments are overdue.
- Keep accurate records of your payment requests and communications.
- Take advice early if the debt remains outstanding, particularly for high-value or complex claims.
Legal recovery and enforcement options
When informal reminders and solicitor-led letters fail to secure payment, it may be necessary to commence legal proceedings.
This involves issuing a claim through the court and, if the debt is not disputed, obtaining a judgment against the debtor.
If a debt remains unpaid following judgment, enforcement action can be taken. This may include:
- Instructing a bailiff or High Court Enforcement Officer to seize goods to the value of the debt
- Obtaining a charging order over the debtor’s property
- Applying for an attachment of earnings order or third-party debt order
Where a claim is defended or more complex issues arise, specialist legal advice will help you assess the best course of action.
Taking proactive steps to protect your business
Early and effective debt recovery action not only helps to protect your cash flow but also sends a clear message to your debtors that payment delays will not be tolerated.
Seeking legal advice at an early stage ensures that your interests are protected and that any necessary proceedings are handled efficiently and cost-effectively.
If your business is facing challenges with late payments or persistent bad debts, we can assist you in securing the payments you are owed and protecting your business from future financial risk. Speak to us today for more information.
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