There comes a point with some invoices where routine chasing has run its course. The promises have been broken, the emails have gone unanswered, and the balance has aged well past the point where a friendly reminder will move it. That's the moment credit control becomes debt recovery. This guide walks through the UK process — your legal rights, the steps before court, the court option itself, and when it makes sense to hand the whole thing to a specialist.
The line between credit control and debt recovery
It helps to be clear about where that line sits. Credit control is the day-to-day work of getting invoices paid on time — reminders, calls, chasing promises. Debt recovery is what happens when that work has been done properly and the customer still hasn't paid. The distinction matters because the tools change: at the recovery stage you have legal rights you can exercise, and a formal process you can follow, that go well beyond a phone call.
The most important thing to understand is that you don't jump straight to court. In fact, jumping straight to court without following the proper steps first can count against you. The UK system expects creditors to try to resolve the debt before issuing a claim — and it gives you useful levers to do exactly that.
Your legal rights: the Late Payment of Commercial Debts (Interest) Act 1998
If you're a business selling to another business, the Late Payment of Commercial Debts (Interest) Act 1998 gives you two powerful statutory rights that many SMEs don't know about — and don't use.
First, statutory interest. Once a commercial invoice is overdue, you have the right to charge interest at 8% above the Bank of England base rate, calculated as simple interest. You don't need to have written this into your contract — the Act implies it. At the time of writing, with the base rate around 4%, that's a 12% annual rate on the overdue balance. It's not a fortune, but it's a meaningful lever: a customer sitting on a £10,000 invoice for three months is accruing real, legally enforceable interest.
Second, fixed compensation. On top of interest, the Act gives you the right to charge a fixed sum to cover debt-recovery costs, set by the size of the debt:
- £40 for debts up to £999.99
- £70 for debts from £1,000 to £9,999.99
- £100 for debts of £10,000 or more
These figures are set out in the legislation and confirmed on GOV.UK. Mentioning them in a firm chasing letter — alongside the running interest total — is often enough to move an account that has been ignoring softer reminders. A customer who won't respond to "please pay" will frequently respond to "please pay, plus £100 compensation and 12% interest, rising daily."
Under the Late Payment of Commercial Debts (Interest) Act 1998, statutory interest is the Bank of England base rate plus 8%, plus fixed compensation of £40, £70 or £100 depending on the debt. — GOV.UK
Before court: the Letter Before Action
Before you issue a claim, you write a formal Letter Before Action (sometimes called a Letter of Claim). This is a final demand that sets out, clearly and professionally, what is owed, by when, and what will happen if it isn't paid. A well-written LBA typically gives the debtor a defined window — often 7 to 14 days — and spells out that failure to pay will result in court proceedings without further notice.
The LBA matters for two reasons. Practically, a large proportion of debts are settled at this stage — the formality of a letter that references the Act, the interest, the compensation and a court deadline often does what weeks of emails couldn't. And legally, if the matter does go to court, having sent a proper LBA shows you acted reasonably and followed the expected process.
There's also a formal Pre-Action Protocol for Debt Claims, published by the Ministry of Justice, which sets out the conduct the court expects before proceedings begin. The protocol has detailed requirements where the debtor is an individual or sole trader; for business-to-business debts, the principle is the same — write, state the claim clearly, give the debtor a reasonable chance to respond, and keep a record of everything. If you're claiming from an individual, follow the protocol precisely; skipping it can affect the costs you recover later.
If the letter doesn't work: Money Claim Online and the courts
If the LBA is ignored or refused, the next step is a formal court claim. For most SME debts, the practical route is Money Claim Online (MCOL) — the government's online service for issuing County Court money claims in England and Wales. You can issue a claim, pay the court fee, and serve the claim on the debtor through the system, without a solicitor.
Most straightforward unpaid-invoice claims end up in the small claims track, which handles claims up to £10,000 (the limit can vary slightly by circumstance). The small claims track is designed to be accessible without legal representation, keeps costs awards limited, and is the realistic forum for the majority of single unpaid SME invoices. Larger debts — £10,000 to £25,000 — fall into the fast track, which is more formal and where legal costs start to matter more.
If the debtor still doesn't respond or pay after judgment, you have enforcement options: a warrant to instruct bailiffs (now County Court enforcement agents), an attachment of earnings for individual debtors, a charging order against property, or a third-party debt order against their bank. Each has its own process and cost, and the right one depends on the debtor's circumstances — which is why many SMEs use a specialist at this point.
When to use a debt recovery service
You can do much of this yourself, and for a single, clean debt the DIY route — firm LBA, then MCOL — is entirely viable. But there are points where a specialist earns their fee:
- When you have several aged debts at once. The admin of issuing and tracking multiple claims quickly becomes more than a busy owner can manage. A service handles the volume.
- When the debt is disputed. A debtor who raises a genuine dispute changes the calculation — you may need to prove the claim, and the small claims track has its own rules. A specialist assesses the strength and advises whether it's worth pursuing.
- When you suspect the debtor can't pay. Pursuing a claim against a company that's about to fold wastes the court fee. A specialist will check the debtor's status and tell you whether there's anything to recover before you spend more.
- When you'd rather not do it at all. For many owners, the time and stress of court proceedings — even the straightforward small claims version — is worth more than the fee a service charges. Handing it over means you get on with running the business while someone else does the chasing, the letters and the filings.
What good looks like
A reputable debt recovery approach — whether you run it yourself or use a service — has three hallmarks. It's structured: a defined sequence of steps, not a series of reactions. It's documented: every letter, call and promise recorded, so you can evidence the process if it reaches court. And it's proportionate: firm enough to be taken seriously, but not so aggressive that it costs you a customer you'd rather keep or invites a counter-claim.
Pricing in the UK market varies. Some services work on a fixed fee per debt; others charge a percentage of what's recovered, often with a lower or no fee if nothing is collected. The model that suits you depends on the number and size of debts you're dealing with — but the key question is always the same: what will this cost, and what's the realistic chance of recovering the balance? A good provider answers both honestly before you start.
The bottom line
The biggest mistake SMEs make with overdue debt isn't chasing too hard — it's leaving it too long. A balance that sits at 60 days is recoverable; the same balance at 180 days, with a customer who's gone quiet, is far harder and far less likely to be collected. The levers exist — statutory interest, fixed compensation, the Letter Before Action, the small claims track — but they work best the earlier you use them.
If you have accounts that have gone past the point of routine chasing, the most useful next step is a proper review: what's owed, how old it is, and which debts are worth pursuing and which are best written off. That review is something we do for free — and it gives you a clear, honest picture before you spend a pound on recovery.