Debt Recovery for Small Businesses in the UK – A Practical Guide
Practical guide to recovering unpaid invoices as a UK small business. From chasing payment to court action — or let GotAClaim automate it for £20.
Chasing Unpaid Invoices Is Costing Your Business
If you run a small business in the UK or Ireland, late payments and unpaid invoices are not just frustrating — they are a genuine threat to your cash flow and survival. According to the Federation of Small Businesses, late payments contribute to the closure of around 50,000 small businesses every year in the UK.
The average small business is owed thousands of pounds in overdue invoices at any given time. The good news is that you do not need a solicitor or a debt collection agency to recover what you are owed.
The UK and Irish court systems provide affordable, straightforward processes for exactly this — and GotAClaim automates the most time-consuming parts.
Step 1 – Invoice Properly
Before you can chase a debt, your paperwork needs to be in order. Every invoice you send should include: your business name and address, the customer's name and address, a unique invoice number, the date of the invoice, a clear description of the goods or services provided, the total amount due, your payment terms (for example, 30 days from date of invoice), and your bank details for payment.
If you did not agree specific payment terms in writing, the law implies a 30-day payment term for business-to-business transactions. Without a clear invoice, your position is weaker if the dispute goes to court.
Step 2 – Chase the Payment
When a payment is overdue, start with a polite reminder by email. Reference the invoice number, the amount, and the original due date. If there is no response within a few days, follow up with a phone call. Keep a record of every attempt you make to contact the customer — dates, times, and what was said.
If the customer acknowledges the debt but says they cannot pay immediately, try to agree a payment plan in writing. A customer who is engaging with you is far easier to deal with than one who is ignoring you.
If they continue to ignore your reminders after two or three attempts, move to the next step.
Step 3 – Send a Letter Before Action
A Letter Before Action (LBA) is the formal step between chasing and court. It tells the debtor in clear legal terms that you intend to file a court claim if they do not pay within a set deadline — usually 14 days.
In England and Wales, sending an LBA is legally required before filing a court claim. In Scotland, Northern Ireland, and the Republic of Ireland, it is strongly recommended.
The LBA must state: who you are and your relationship with the debtor, what is owed and what for, the exact amount including any interest, the deadline to respond, and your intention to file a court claim if they do not pay.
This is the step where most debts are recovered. Once a customer receives a formal Letter Before Action, the reality of a court judgment — and the damage a County Court Judgment does to their credit rating — usually motivates payment.
GotAClaim sends a professionally formatted Letter Before Action by email for £20, with automated follow-up reminders. For most businesses, this is the only step needed.
Step 4 – Claim Statutory Interest
If a business customer is late paying you, you have a legal right to charge interest on the debt under the Late Payment of Commercial Debts (Interest) Act 1998. The statutory rate is 8% per year plus the Bank of England base rate.
You can also charge a fixed compensation amount on top: £40 for debts up to £999.99, £70 for debts between £1,000 and £9,999.99, and £100 for debts of £10,000 or more.
You do not need the customer's permission to charge this interest — it is your legal right. Include the interest and compensation in your Letter Before Action and in any subsequent court claim. GotAClaim calculates statutory interest automatically.
Step 5 – File a Court Claim
If the debtor ignores your Letter Before Action, you file a court claim. The process and costs depend on your jurisdiction.
In England and Wales, file through Money Claim Online (MCOL) or using Form N1 for claims up to 10,000 pounds. Court fees range from 35 pounds to 455 pounds.
In Scotland, file through Civil Online using the Simple Procedure for claims up to 5,000 pounds. Court fees are 22 pounds or 123 pounds.
In Northern Ireland, file through the NI Courts and Tribunals Service for claims up to £5,000. Application fees range from £47 to £155.
In the Republic of Ireland, file through the Courts Service for business-to-business claims up to €2,000. The fee is a flat €25.
GotAClaim prepares your pre-filled court filing pack for £30 (€35 in Ireland) using the details you already provided in your LBA. No re-typing and no guesswork. For a full breakdown see our court fees guide.
Step 6 – Enforce the Judgment
Winning a court judgment does not guarantee payment. If the debtor still refuses to pay, you need to take enforcement action.
Options vary by jurisdiction but typically include: attachment of earnings orders, third-party debt orders to freeze bank accounts, charging orders against property, and bailiffs or sheriff officers to seize goods.
Each enforcement step has its own fee. Before filing a claim, it is worth checking whether the debtor has existing unpaid judgments against them or signs of insolvency — a judgment against an insolvent company is worth nothing.
Debt Collection Agencies vs Doing It Yourself
Many small businesses default to using a debt collection agency. Here is why that may not be the best option.
Agencies typically charge between 15% and 35% of the recovered amount — so on a £3,000 debt, you could lose £450 to £1,050 in fees. They have no legal power to force payment — they can only chase and negotiate. If the debtor still refuses to pay, the agency will recommend court action anyway.
With GotAClaim, the total cost of a Letter Before Action plus court filing pack is £40 (€45 in Ireland) plus the court fee. You keep 100% of what is recovered.
And because a court judgment carries real legal consequences — including damage to the debtor's credit rating and enforcement powers — it is far more effective than a phone call from a collection agency.
Repeat Debtors and Ongoing Protection
If unpaid invoices are a regular problem for your business, the solution is not just chasing each debt individually — it is building a system.
Make sure your contracts include clear payment terms, interest clauses, and a reference to the Late Payment of Commercial Debts Act. Send invoices promptly and follow up immediately when payment is overdue.
Use GotAClaim as your standard escalation path — when a reminder is ignored, send an automated LBA for £20. In most cases, that is where it ends. For the minority that do not pay, your court filing pack is already prepared.
Already Sent Your Own Letter Before Action?
If you have already sent a letter before action yourself and the debtor has ignored it, GotAClaim can still help.
Start with our £20 automated LBA service. A second professionally formatted LBA with automated reminders strengthens your paper trail and gets your claim details into our system — which then unlocks your pre-filled court filing pack for £30.
Think of it as upgrading your debt recovery process, not starting over.
Frequently Asked Questions
How long do I have to recover a debt?
In England, Wales, and Northern Ireland, you have 6 years from the date the debt became due. In Scotland, it is 5 years. Do not wait — evidence becomes harder to gather and debtors become harder to trace over time.
Can I recover the court fees from the debtor?
Yes. If you win your case, the court normally orders the debtor to pay your court fees on top of the amount owed.
What if the debtor is a sole trader who has gone bankrupt?
If the debtor is bankrupt, you would need to submit your claim to the trustee in bankruptcy. You are unlikely to recover the full amount. Check the Individual Insolvency Register on GOV.UK before filing.
Can I charge interest on overdue invoices even if my contract does not mention it?
Yes. The Late Payment of Commercial Debts (Interest) Act 1998 gives you the automatic right to charge interest at 8% plus the Bank of England base rate on business-to-business debts, even if your contract is silent on the matter.
Is it worth suing for small amounts?
It depends on the amount versus the court fee. For example, recovering a £500 debt costs £70 in court fees in England and Wales — which you get back if you win. With GotAClaim, many debts are recovered at the LBA stage for just £20, making even small amounts worthwhile.
What if I already sent a Letter Before Action and it was ignored?
Start with our £20 automated LBA service to get your details into our system and create a documented trail. Then unlock your pre-filled court filing pack for £30.
Stop Losing Money to Late Payers
Most unpaid invoices are recovered with a single Letter Before Action. Start with our £20 automated service — if they do not pay, your court forms are ready.