How to collect a business debt

  • 07 Jun 2022

By Amanda Hamilton is Chief Executive of the National Association of Licensed Paralegals (NALP)

The last couple of years have been tough for many businesses. Chasing someone who owes money and who is having difficulties can seem heartless but, on the other hand, if your business is also struggling, there is a limit to how generous you can be if your business is to survive. Remember - all FSB members can use the FSB Debt Recovery service free of charge. But what else do you need to consider?

Keep your powder dry

Going to court is an option but keep it in reserve. First, try a lighter approach. Contact the other party to say that this invoice/debt is outstanding and, while you understand that times are hard, would there be a possibility of paying it off by instalments?

If they are amenable and accept that the money is outstanding, you can then negotiate a regular payment that would be acceptable to both parties. Ultimately, a court would ask the debtor that very same question.


For the ‘light’ touch to be effective, negotiation is the key, but if this doesn’t work, you can institute court proceedings.

Give plenty of notice

There is a ‘pre-action protocol’ that you must do before any court proceedings are commenced, which is otherwise referred to as a ‘letter before action’, which must state who you are and why you are asking for the debt to be paid.

It could be money owed for services rendered and an unpaid invoice (eg, decoration or gardening) or it could be for not fulfilling a contract. Whatever the reason is, you must put all the relevant details in a letter and include with it any evidence such as a fee invoice that you submitted, or a copy of a contract signed by both parties.

The letter should also give the other party a timeframe to respond, either to make payment in full or to make contact to negotiate how to pay it off. The letter should also make it clear that you are open to discussion, but that if you have not had a response by the chosen date, then you may decide to commence legal proceedings without further notice.

Be careful what you wish for

There’s a rule of thumb which says you should never threaten legal proceedings unless you are absolutely intent on carrying that through. Therefore, you should not mention this lightly unless you are seriously willing to proceed.


You should always ensure you have sufficient evidence and reason for taking court action before you commence a claim.

Court proceedings

Starting court proceedings can be done online if it is a fairly straightforward small claim without complications. And online fees to do so are slightly less than sending in paper versions. The fees go on a sliding scale dependent on how much is owed.

For example, for claim amounts from below £300 up to £1,500, the court fee is between £35-£70 if you issue online – a little more if not. Claims worth over £1,500 up to and beyond £10,000 cannot be issued online and the fees range from £110 – to 5 per cent of the claim for any that are over £10,000.

The claim form should be completed and usually, once stamped by the court, a copy gets sent to the other party, a copy is kept by the court, and you get the third copy.

The court usually sends the issued claim form to the other party (the defendant) with a response pack containing a number of documents and information on the options that the defendant can choose: to pay the debt in full, to acknowledge service of the claim form and indicate that they want to defend, and various other options.

However, whatever the defendant decides to do, they must contact the court within 14 days, failing which, you may have the right to get a default judgment against them.

Further details on how to make a claim and the fees can be found at:

Help is available if you need it

Although the small claims system is relatively straightforward, if you feel you need assistance, you can always call upon the services of a paralegal who will be able to help you at a reasonable cost. You can locate one on the National Paralegal Register at

It’s worth noting, that even if you do win a judgment against the other party and the court agrees that they owe you the money and must pay it, that doesn’t automatically mean you will receive the money. You may need to enforce the judgment and this can require additional time, money and court paperwork.


Sometimes calling on a professional debt collector can be the easiest and least stressful option. They will charge a small fee but they know the process of debt collection inside-out and so often have a much better success rate than doing it yourself. 



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