TRW & Co · Disputes and arbitration
How to Recover Unpaid Invoices from a Business Customer
To recover unpaid invoices from a business customer in England and Wales, chase in writing, add statutory interest and fixed compensation, send a letter before claim, then issue a county court money claim or, for a clear company debt, a statutory demand. If judgment is ignored, enforce it. The right route depends on whether the debt is disputed and the customer is solvent.
Key pointA statutory demand is only safe for a debt that is genuinely undisputed; the first formal letter often reveals whether a dispute exists, and that answer should decide your route.
At a glance
Statutory interest
Under the Late Payment of Commercial Debts (Interest) Act 1998, business creditors can claim 8% over Bank of England base rate unless the contract provides otherwise.
Fixed recovery costs
Suppliers can add £40, £70 or £100 per invoice depending on the debt's size, plus reasonable recovery costs, according to GOV.UK guidance.
Mediation for small claims
Defended money claims of £10,000 or less must go to free court-organised telephone mediation, and the court can sanction non-attendance.
Statutory demand thresholds
After 21 days unpaid, a creditor can petition to wind up a company owing £750 or more or bankrupt an individual owing £5,000 or more.
Reform pending
As of October 2026, the Commercial Payments Bill, which would cap business payment terms, was at third reading in the House of Lords and not yet law.
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The short answer: how to recover unpaid invoices
To recover unpaid invoices from a business customer in England and Wales, work through a clear escalation: confirm the debt and the contract terms, chase in writing, add statutory interest and compensation, send a formal letter before claim, then either issue a county court money claim or, for an undisputed debt owed by a company, serve a statutory demand. If the customer still does not pay after judgment, enforce it through the court.
The right route depends on three things: whether the debt is genuinely undisputed, how much it is, and whether the customer is solvent. A court claim is the default for a disputed or modest debt. Insolvency pressure is powerful but reserved for clear debts, and can backfire if the customer has a real defence.
As of October 2026, the core tools are unchanged, but reform is coming. The Commercial Payments Bill, which would cap business payment terms and strengthen the Small Business Commissioner, was at third reading in the House of Lords in October 2026 and is not yet law.
The legal framework for business debts
An unpaid invoice is usually a claim for a debt due under a contract. The contract, including any standard terms that were properly incorporated, sets the payment date, any contractual interest and how disputes are handled. If the contract is silent, the general law fills the gaps.
The Late Payment of Commercial Debts (Interest) Act 1998
The Late Payment of Commercial Debts (Interest) Act 1998 implies a right to statutory interest into business-to-business contracts for goods and services. According to GOV.UK guidance on late commercial payments, statutory interest is 8% plus the Bank of England base rate, unless the contract provides a different, substantial remedy. Suppliers can also add a fixed sum for recovery costs, set by the size of the debt, and claim reasonable recovery costs beyond that.
| Amount of debt | Fixed sum you can charge |
|---|---|
| Up to £999.99 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
Where no payment date is agreed, payment is late 30 days after the customer receives the invoice or the goods or services are delivered, if later. Agreed terms longer than 60 days between businesses must be fair to both sides. Our guide to late payment interest explains how to calculate and claim it.
Civil Procedure Rules and pre-action conduct
Court claims are governed by the Civil Procedure Rules. Before issuing, a creditor is expected to follow the Practice Direction on Pre-Action Conduct, or the Pre-Action Protocol for Debt Claims where the debtor is an individual or sole trader. Skipping these steps risks costs penalties even if the debt is proved. Our article on the letter before claim covers the content and response periods. Businesses that recover unpaid invoices regularly benefit from a standard template reviewed by a solicitor, so that every letter meets the rules.
The process to recover unpaid invoices, step by step
- Check the paperwork. Confirm the contract, the terms that apply, the purchase order, proof of delivery or performance, the invoice and any credit notes. Identify the correct legal entity that owes the money; a trading name is not a party.
- Chase and record. Send a polite reminder and a statement of account. Keep a log of calls and emails. Any reply admitting the debt, or raising a specific complaint, will matter later.
- Add interest and compensation. Send a revised invoice or statement adding statutory or contractual interest and the fixed compensation sum. This often prompts payment on its own.
- Send a letter before claim. Set out the debt, how it is calculated, a deadline to pay and an invitation to discuss settlement or alternative dispute resolution. For individual or sole trader debtors, use the debt protocol forms and allow the prescribed response period.
- Choose the route. If the debt is disputed, or the customer is an individual, a court claim is usually right. If it is a clear, undisputed debt owed by a company, a statutory demand may be considered.
- Issue the claim. Most claims for a fixed sum can be issued online through the court's money claim service, paying a fee based on the claim value. Larger or complex claims may be issued on paper or in the High Court.
- Obtain judgment. If the defendant does not respond in time, request default judgment. If it admits, request judgment on the admission. If it defends, the claim is allocated to a track and proceeds to a hearing.
- Enforce. If a judgment is not paid, use the court's enforcement tools: enforcement agents, third party debt orders, charging orders or, for individuals, attachment of earnings.
Court claims: tracks, mediation and default judgment
For most businesses that need to recover unpaid invoices through the courts, a money claim begins in the County Court unless its value or complexity justifies the High Court. Court fees are payable on issue and depend on the amount claimed; GOV.UK publishes the current scale, which rises to 5% of the claim for claims between £10,000.01 and £200,000. Fees are generally recoverable from the debtor if you win.
Defended claims and tracks
If the customer files a defence, the court allocates the claim to a track. Small claims are those up to £10,000; fast track claims run up to £25,000; and the intermediate track covers most claims up to £100,000. Above that sits the multi-track. Recoverable legal costs are very limited on the small claims track and fixed on the fast and intermediate tracks, which affects whether instructing lawyers is economic for a smaller debt.
Mandatory mediation for smaller claims
GOV.UK guidance confirms that if a claim is for £10,000 or less and the defendant disputes it, the parties must attend a free, court-organised telephone mediation. The judge can impose sanctions for failing to attend. For larger claims, mediation may be offered or arranged privately; see our guide to mediation in commercial disputes.
Default judgment
Many debt claims end without a hearing. If the defendant does not acknowledge service or file a defence within the time allowed after service of the particulars of claim, the claimant can request default judgment for the sum claimed plus interest and fixed costs. Defendants can apply to set aside a default judgment, so the claim should be properly pleaded and served at the correct address from the outset.
Statutory demands and winding-up petitions
A statutory demand is a formal demand under insolvency legislation. According to GOV.UK guidance on statutory demands, the debtor has 21 days to pay or reach an agreement. If it does not, the creditor can petition to wind up a company that owes £750 or more, or to bankrupt an individual who owes £5,000 or more. A debt more than six years old usually cannot support a statutory demand.
Insolvency pressure can produce fast payment from solvent companies that cannot risk a winding-up petition. But it is a blunt instrument. If the debt is genuinely disputed on substantial grounds, the court can restrain a petition and order the creditor to pay costs. Insolvency processes also benefit all creditors, not just the one who started them. Our guides to the statutory demand and the winding-up petition explain the risks in detail.
Never use a statutory demand to resolve a dispute. If the customer has raised a specific, documented complaint about the goods or services before the demand, issue a court claim instead and let the court decide.
Options compared: which route fits your debt?
Choosing the right route is the single biggest factor in whether you recover unpaid invoices quickly and economically.
| Route | Best for | Main advantage | Main risk |
|---|---|---|---|
| Letter before claim with interest | All debts, as a first formal step | Cheap, often effective, protects costs position | No compulsion if ignored |
| Online money claim | Fixed-sum claims, including disputed ones | Straightforward; default judgment if no response | Court fee; delay if defended; limited costs recovery on small claims |
| Paper or High Court claim | Large, complex or multi-party debts | Full case management; costs recovery on multi-track | Higher cost and longer timetable |
| Statutory demand and winding-up petition | Clear, undisputed debts owed by companies | Strong commercial pressure | Costs if debt disputed; benefits all creditors |
| Enforcement of judgment | Judgment debts not paid voluntarily | Court-backed collection against assets | Depends on the debtor having reachable assets |
Enforcing a judgment to recover unpaid invoices
A judgment is only as good as the debtor's assets. The court's guidance on making a court claim for money lists the main tools. An order to obtain information requires the debtor, or an officer of a debtor company, to attend court and answer questions about its finances. That helps choose the right next step.
- Warrant or writ of control. Enforcement agents attend to take control of goods. County Court warrants are available for debts of £5,000 or less, and judgments of at least £600 can be enforced in the High Court by a writ of control executed by High Court enforcement officers.
- Third party debt order. Freezes money held by a third party, typically a bank, and orders it to be paid to the creditor.
- Charging order. Secures the debt against land or property owned by the debtor, which can lead to an order for sale.
- Attachment of earnings. For individual debtors, deductions are made from wages.
Our page on enforcement of judgments explains how these tools work for larger debts and debtors with assets abroad.
An illustrative scenario
This scenario is illustrative only; the parties are generic.
A London design agency completed a project for a retail company and invoiced the agreed fee on 30-day terms. Ninety days later, the invoice remained unpaid. The client had not complained about the work, but had stopped replying to emails.
The agency first sent a statement adding statutory interest and the fixed compensation sum. When that was ignored, its solicitors sent a letter before claim with a 14-day deadline and an offer to mediate. The client's finance director then replied, for the first time, alleging that some deliverables were late. Because the complaint was raised, a statutory demand was no longer appropriate. The agency issued an online money claim. The client filed a defence, the case was allocated to the fast track and the parties settled at court-arranged mediation for most of the invoice plus a contribution to interest.
The lesson is that the first formal letter often reveals whether a debt is truly undisputed, and that answer decides the route.
Risks and common mistakes
Suing the wrong entity
Invoices are often addressed to a trading name, a brand or the wrong group company. A judgment against the wrong entity is worthless and may expose you to costs. Check Companies House and the contract to confirm the legal entity that contracted with you, and use its registered name and number in the claim.
Ignoring the pre-action rules
Issuing without a proper letter before claim, or without allowing a reasonable time to respond, can lead to costs or interest penalties even if the debt is proved. For individual and sole trader debtors, the debt protocol's prescribed forms and response period apply. Following the rules costs little and protects your recovery.
Using insolvency pressure on a disputed debt
A statutory demand or winding-up petition based on a debt that is disputed on substantial grounds can be set aside or restrained, and the creditor may be ordered to pay the debtor's costs. Advertising a petition against a solvent company that has a genuine dispute can also expose the creditor to further claims. Use the court claim route where any real dispute exists.
Letting time run out
Contract debts are subject to a six-year limitation period from the date payment fell due. Old debts become harder to prove as staff and records move on. See our guide to the limitation period, and consider obtaining a signed acknowledgment of the debt, which restarts time.
Cross-border customers
If the customer is outside England and Wales, the online service may not be available, and the claim form may need to be served abroad, sometimes with the court's permission. The contract's governing law and jurisdiction clause becomes critical. A judgment then needs to be recognised and enforced where the customer has assets.
For customers in Bangladesh, an English judgment is not automatically enforceable there, and the route depends on Bangladeshi procedural law. An arbitration award may be easier to enforce under the New York Convention. Our guide on enforcing a UK judgment in Bangladesh explains the options. Where you need to recover unpaid invoices from an overseas customer, check early whether the customer has assets in England and Wales, because enforcing locally is usually quicker than enforcing abroad. Planning for enforcement when drafting terms and conditions is far cheaper than solving it after the debt arises.
What to do next: a checklist
- Gather the contract, terms, purchase order, delivery evidence, invoice and correspondence.
- Confirm the debtor's exact legal identity and registered address.
- Calculate statutory or contractual interest and add the fixed compensation sum.
- Send a compliant letter before claim with a clear deadline and an ADR proposal.
- Decide: court claim for any disputed debt; statutory demand only for a clear, undisputed company debt.
- Check the debtor's solvency and assets before spending on litigation.
- Track limitation and enforcement options from the outset.
- Review your standard terms so that future contracts set clear payment dates, interest, retention of title where appropriate and a jurisdiction clause that makes enforcement easier.
TRW & Co's London office is authorised and regulated by the Solicitors Regulation Authority. We help businesses recover unpaid invoices, from letters before claim to issuing proceedings and enforcing judgments, through our debt recovery and commercial litigation teams. To discuss an unpaid invoice, contact us at info@trw.co.
Frequently asked questions
01Can I charge interest on an unpaid invoice?
Yes. If your contract sets a rate, that applies. If not, the Late Payment of Commercial Debts (Interest) Act 1998 lets a business supplier claim statutory interest at 8% above the Bank of England base rate on late payments from another business. You can also add a fixed compensation sum of £40, £70 or £100 depending on the size of the debt, and in some cases reasonable additional recovery costs. Send a revised invoice or statement showing the interest added.
02How long does a business customer have to pay an invoice?
The contract usually decides. Where no payment date is agreed, payment is late 30 days after the customer receives the invoice or the goods or services are delivered, if later. Agreed terms between businesses that exceed 60 days must be fair to both parties. The Commercial Payments Bill would introduce a firmer cap, but as of October 2026 it had not completed its passage through Parliament.
03Should I use a statutory demand or a court claim?
Use a court claim if there is any genuine dispute about the debt, or if the debtor is an individual and the debt is modest. A statutory demand is suited to clear, undisputed debts owed by companies, where the threat of winding up encourages payment. If you serve a statutory demand or present a petition on a debt disputed on substantial grounds, the court can restrain it and order you to pay costs.
04What happens if the customer ignores my court claim?
If the defendant does not acknowledge service or file a defence within the time allowed after being served with the particulars of claim, you can ask the court for default judgment. You can then enforce the judgment if it is not paid, for example by instructing enforcement agents, obtaining a third party debt order against a bank account or a charging order over property. The defendant may apply to set aside default judgment, so ensure the claim was properly served.
05Do I need a solicitor to recover an unpaid invoice?
Not necessarily. Many businesses issue small, undisputed claims themselves using the online money claim service. For larger or disputed debts, debts owed by foreign customers, or where insolvency procedures are being considered, legal advice helps you choose the right route, comply with pre-action rules, avoid costs penalties and plan enforcement. On the small claims track, legal costs are generally not recoverable, which affects the economics.
06How long do I have to recover an unpaid invoice?
Contract debts in England and Wales are subject to a six-year limitation period, usually running from the date payment fell due. After that, the debtor has a complete defence. A written acknowledgment signed by the debtor, or a part payment, made before the six years expire restarts the period. GOV.UK guidance also notes that a debt over six years old usually cannot support a statutory demand.
Sources and official materials
- Late commercial payments: charging interest and debt recovery — Statutory interest, payment terms and fixed compensation
- Late Payment of Commercial Debts (Interest) Act 1998 — Statutory interest legislation
- Make a court claim for money — Fees, online claims, mediation and enforcement
- Make and serve a statutory demand — 21-day demands and insolvency thresholds
- Limitation Act 1980 — Six-year limit for contract debts
General information only, current as at 21 October 2026. It is not legal advice and does not create a solicitor–client relationship. It reflects the law of England and Wales unless stated otherwise; Scotland and Northern Ireland have separate legal systems, and the law changes frequently. Check current official sources and take advice on the facts of your matter.