Business thrives on a surprisingly large amount of goodwill. A customer ask for goods, a supplier sends them out, waits 30 days (or more!) and hopes for payment. Business relies on honest brokers to avoid bad debt.
So, what happens if something goes wrong? What happens when the customer doesn’t pay?
There are four main things you can consider, and many businesses will start at the beginning and work through each option, as stages get more formal, more costly and more serious.
- Contact the debtor and demand payment
Start by contacting the person or company who owes you money to discuss the issue and attempt to resolve it informally.
- Send a formal letter of demand
If informal attempts fail, send a formal letter of demand outlining the debt, the reason for the claim, and the expected payment date. You can also use a statutory demand to formally ask for money owed.
- Consider mediation
An impartial professional can help both sides reach an agreement, which is often quicker and cheaper than court.
- Make a court claim
If mediation fails, you can make a court claim for the money you’re owed. You can apply online or by post. You can use the Civil Money Claims service to make a small claim.
Ensure you have all the necessary evidence to support your claim, e.g. contracts, invoices, proof of delivery, etc.
If the defendant doesn’t respond or refuses to pay, you can request a judgment from the court. If the court rules in your favour, you can ask the court to enforce the judgment, potentially leading to bailiffs being sent to collect the money.
Alternative ways of getting your money back
Whilst these four are the standard method of getting bad debts paid for, there are some additional methods. Businesses who frequently experience late or non-payment might use a debt recovery agency or factoring company.
If you’re owed a significant amount (£5,000 or more) by an individual, you can apply to make them bankrupt.
If you’re owed money from a company that is being liquidated, you must register your claim with the liquidator or insolvency agency to ensure you can get a share of any available funds.
For further information, please contact Christopher Cooper on 01535 613680 or email christopher.cooper@awbclaw.co.uk
7 April 2025
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