What is Debt Recovery?

Debt recovery is the process of collecting money owed to your business when normal payment terms have been exceeded. In the UK, there is a structured escalation path from informal reminders to court action.

The debt recovery escalation process:

Stage 1 - Informal chasing (1–30 days overdue): - Send a payment reminder email referencing the invoice - Follow up with a phone call - Send a second reminder with firmer wording - Clearly state the due date and total owed

Stage 2 - Formal demand (30–60 days overdue): - Send a Letter Before Action (LBA) using the deadline and information required by the pre-action process that applies - Include statutory interest and compensation only where the debt is eligible - Keep records of all correspondence

• **Stage 3 - Alternative dispute resolution (if applicable):**
• Mediation: - a neutral third party helps negotiate a resolution
• Adjudication: - common in construction disputes (under the Housing Grants, Construction and Regeneration Act 1996)

Stage 4 - Court action: - In England and Wales, use the official online money-claim service where the claim is eligible - The court decides the appropriate track using value, complexity and other factors; a claim worth £10,000 or less is generally considered for the small claims track - Scotland and Northern Ireland use different court processes

• **Stage 5 - Enforcement:**
• If you win a court judgment but the debtor still doesn't pay:
• County Court Judgment (CCJ): - damages the debtor's credit rating
• Bailiff enforcement: - court-appointed bailiffs recover goods
• Attachment of earnings: - payments taken directly from wages
• Statutory demand / winding-up petition: - for debts over £750 (company) or £5,000 (individual)

Costs: Court fees range from £35 (for claims up to £300) to £455 (for claims up to £10,000). You can usually add these to your claim.