x
Our website uses cookies. By continuing to use the site, you agree to our use of these cookies. To learn more about how we use the cookies and how you can manage them, please see our cookies policy.
A complete guide to commercial debt collection in the UK
According to research conducted by Barclays, three out of five UK businesses are owed money from late payments. Businesses rely on a steady cash flow; problems may arise without this. Recovering commercial debts can be challenging and complex, particularly if you are unaware of the UK’s laws and regulations.
This guide will summarise the most relevant information in the UK commercial debt collection hub, including the procedure for recovering commercial debts, and the importance of instructing an expert lawyer.
Click on the links below to jump to that section:
Find out the most important UK laws on debt collection that your business should know.
Discover the steps for recovering commercial debts in the UK.
The different commercial debts that are common for businesses.
Find out how to protect your business from existing and future bad debts with the guidance of a debt collection lawyer.
Discover the importance of a debt collection lawyer for recovering commercial debts.
What UK debt collection laws should business owners be aware of?
In the UK, debt collection is governed by various statutes and regulations. To collect debts, proceedings must adhere to the law. This includes:
The Consumer Credit Act 1974 - regulates consumer credit and consumer hire agreements.
The Late Payment of Commercial Debts (Interest) Act 1988 – allows for the recovery of debt collection costs and interest rates on late commercial payments.
The Financial Conduct Authority (FCA) - sets guidelines for fair debt collection practices.
The Insolvency Act 1986 – key for businesses recovering debts from insolvent companies or individuals.
These laws regulate debt collection activities in the UK and ensure all procedures are carried out in a fair, transparent, and professional manner. The role of multi-lingual and multi-jurisdictional lawyers is pivotal, particularly for businesses engaged in cross-border trade.
The cross-border expertise and knowledge allow them to navigate international laws, and is essential for effective debt recovery across different jurisdictions. This ensures that the procedure is undertaken within the laws of the jurisdiction, particularly if a judgment is not to be enforced in England and Wales.
Find out more about UK laws on debt collection with our expert guide here.
What is the procedure for commercial debt collection in the UK?
In the UK, commercial invoices are expected to be paid within 60 days, and 30 days for public authorities. However, the payment date can vary within the contract, if agreed upon between the parties.
If the debtor has not paid within the agreed or statutory period for settlement, at that point a creditor should ensure that the business has sent an invoice detailing all relevant information about the payment – the outstanding amount, what it was for and the date when payment is expected, how to pay and a reminder of the initial terms and conditions. After sending a reminder of the outstanding payment, the commercial debt recovery process is as follows:
Withdrawing supply – halting any further services or supplies can provoke payment, particularly for B2B transactions.
Letter Before Action (LBA) - issued to the debtor with a demand specifying the debt and when it should be paid.
Outside of court strategies - attempts to resolve the situation by means of direct negotiation procedures such as ADR.
Initiate legal proceedings – debt collection lawyers will guide you through the process, and issue proceedings against the debtor on your behalf.
Enforcement - various methods can be employed to enforce a judgment, including asset seizure or wage garnishment.
What types of commercial debts may arise?
Commercial debts come in various forms, each requiring a tailored approach to recovery. Common types of commercial debts include:
Unpaid invoices
Overdue rent payments
Unpaid commercial loans and other forms of credit
Unpaid invoices for goods and/or services
Unpaid salaries and wages
Unpaid legal fees or judgments
Cross-border debts in various forms
Many businesses may prefer solutions that solve the issues outside of the Court, as this route is less time-consuming and cost effective. Alternative dispute resolution (ADR) is a conglomerative term for resolving disputes by negotiation between the parties without court involvement and includes mediation and arbitration.
To simplify recovering cross-border debts, seek legal advice from international debt collection lawyers. They will offer bespoke advice depending on the amount of the debt, the type of commercial debt, and the potential difficulty of the recovery.
Request a callback from Giambrone & Partners' debt collection lawyers today for information on our services.
How can you protect your business from being involved in the debt collection process?
In business, bad debts refer to money that a corporate creditor is owed which is seriously overdue and is unlikely to be paid back for various reasons. Without receiving payments, companies may struggle to pay their suppliers and other payroll obligations. In addition, a history of bad debts can undermine future relationships and imply an improved debt collection process needs to be in place.
To protect your business from unpaid debts, ensure you invoice and chase overdue payments, complete research to reduce the risk of working with untrustworthy clients or partners. When preventive measures do not suffice, and debts remain unpaid, instructing a lawyer (solicitor, if litigating in England and Wales) to send a letter before action becomes a necessary course of action.
Does my business need a debt collection lawyer?
Although you may think your company does not require external assistance, hiring expert debt collection lawyers will help speed up the collection process and enhance the success rate of recovering outstanding debt. In certain situations, instructing debt collection lawyers is not only beneficial but a necessity.
Enlisting the expertise of an experienced debt collection lawyer ensures a targeted and strategic approach to debt recovery, often proves to be a cost-effective and efficient avenue.
Ensure you instruct an experienced debt collection lawyer with a successful track record in recovering debts. For cross-border commercial debts, instruct a lawyer with the capacity to operate in the jurisdiction where the matter will be litigated and that they are multilingual and have a strong reputation.
Find out more about when a business would benefit from a debt collection lawyer here.
Giambrone & Partners provides bespoke debt collection services, looking at your specific requirements to suggest the best approach for successfully recovering outstanding commercial debts. Our debt collection lawyers will form and send a Letter Before Action (LBA) using legal jargon and within UK regulations, before issuing proceedings.
Related content