An overdue invoice can disrupt payroll, purchasing and growth even when a business is trading well. For suppliers, the useful starting point is a documented recovery plan: establish what is due, check the available remedies and choose a proportionate response.

This Insight concerns commercial debts and court procedure in England and Wales, checked on 26 October 2026. It describes the existing legal framework; proposals for reform should not be treated as enforceable rights before the relevant changes take effect.

Establish the debt before escalating

Check the customer's legal identity against the contract and purchase order. A trading name, limited company and individual sole trader are not interchangeable. Gather the agreed terms, invoice, evidence of delivery or completed services, and correspondence about acceptance, defects or credits.

Then confirm the payment deadline. Where no date was agreed, GOV.UK explains that payment generally becomes late 30 days after the customer receives the invoice or the goods or services are supplied, whichever is later. Agreed business payment periods are normally within 60 days, although longer periods may be agreed if fair to both businesses. Check any acceptance procedure and sector-specific rules before calculating arrears.

Check interest and compensation separately

For qualifying commercial debts, statutory interest is generally eight percentage points above the relevant Bank of England reference rate. Do not simply use today's headline rate: the legislation fixes the reference date by when interest starts running. A substantial contractual late-payment remedy can displace statutory interest, so the contract needs checking first.

Once statutory interest starts on a qualifying debt, fixed compensation is £40 for debts below £1,000, £70 for debts from £1,000 to below £10,000, and £100 for debts of £10,000 or more. It is not a fresh charge for every reminder. Additional reasonable recovery costs may be recoverable to the extent they exceed that fixed sum; avoid counting the same costs twice.

Keep principal, interest, compensation and any additional costs as separate entries. Record the basis and dates used so the customer can understand the demand and any later reviewer can reproduce the calculation.

Match the response to the problem

Ask whether payment is delayed by an administrative issue, a genuine dispute or an inability to pay. A missing purchase-order reference may need a corrected invoice. A complaint about performance needs a considered response with supporting evidence. Where cash flow is the issue, a written instalment arrangement may be commercially preferable to immediate proceedings.

Set clear payment dates and record what happens if an instalment is missed. Do not assume that accepting part-payment settles the balance, or that an informal exchange safely preserves every right. Obtain advice before accepting terms described as full and final settlement.

Follow the right pre-action process

Before issuing a claim, identify the applicable protocol. The Debt Claims Protocol generally covers a business claiming against an individual, including a sole trader; it is not normally the protocol for a debt owed by a limited company. Other protocols can apply to particular disputes.

Where no specific protocol applies, the general pre-action rules expect sufficient information and key documents to be exchanged, a reasonable opportunity to respond, and consideration of settlement or alternative dispute resolution. An aggressive deadline is not a substitute for the correct process.

Make recovery commercially worthwhile

Compare the sum outstanding with likely costs, management time and the customer's ability to pay. A judgment does not itself guarantee payment. Keep a consistent credit-control record and obtain advice promptly where liability is disputed, deadlines are approaching or the debtor is overseas.

Balaghi & Rose advises on commercial debt recovery and disputes. Contact our team to discuss the documents and a proportionate next step.

General information only, published 26 October 2026. This is not legal advice; the appropriate approach depends on the contract and circumstances.

Sources

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