How to recover unpaid invoices from another business (B2B)?

You’ve done the work. They haven’t paid. Now what? Most businesses waste weeks sending polite reminders, unaware they can charge statutory interest from day one or issue formal demands that carry serious legal weight. B2B debt collection isn’t about patience, it’s about knowing which pressure points to use and when. This guide reveals the step-by-step process for business-to-business debt recovery, from reviewing payment terms to court enforcement. For complex matters, consult a solicitor specialising in commercial or business law and debt recovery and collection.

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Your legal position: Know what you’re owed

Recovery starts with knowing exactly what you can claim and proving you’re entitled to it.

1. Review your contract and payment terms

Before pursuing unpaid invoices, establish your legal foundation. Without a clear contractual basis, contract enforcement becomes significantly harder.

Check the following in your agreement:

• Payment terms: Confirm whether 30, 60, or 90 days applies; vague terms like “end of month” can create disputes over calculation dates.
• Late payment clauses: Some contracts specify penalty rates or debt recovery costs the debtor must cover beyond statutory interest.
• Retention of title: This clause lets you reclaim goods if payment fails, provided you act before the debtor resells or incorporates them.
• Dispute resolution requirements: Mediation or arbitration clauses may be mandatory before court action, delaying B2B debt collection.
• Jurisdiction: Contracts specifying Scottish or Northern Irish law follow different procedures than English courts.

2. Calculate what you’re owed

Precision strengthens your claim. Approximate figures invite disputes and delay business-to-business debt recovery.

Your calculation should include:

• Principal amount: The original invoice value minus any legitimate deductions or partial payments already received.
• Statutory interest: Calculated daily from the due date at 8% plus Bank of England base rate (currently 8.5% total).
• Fixed compensation: £40 for debts under £1,000; £70 for £1,000-£9,999; £100 for £10,000+ under the Act.
• Contractual penalties: Additional late payment fees if your terms permit and don’t constitute unfair contract terms.
• VAT: Confirm whether interest applies to VAT portions depending on your original invoice structure.

The pre-action protocol

Courts expect you to attempt resolution before issuing proceedings; jumping straight to litigation can result in cost penalties even if you win.

1. Send a formal demand letter

A properly drafted letter before action often secures payment without further escalation. The LBA is a legal prerequisite demonstrating you’ve followed the pre-action protocol for debt claims.

Your formal demand must include:

• Clear debt breakdown: State the exact amount, invoice numbers, dates, and how statutory interest has been calculated to the letter date.
• Payment deadline: Specify 14 days (or 30 days for claims over £10,000) from receipt, with exact date stated.
• Consequences of non-payment: Warn that court proceedings will follow, adding court fees and legal costs to the debt.
• Dispute procedure: Invite them to raise any legitimate dispute within the deadline, explaining what evidence they must provide.
• Settlement offer: Consider offering a slight discount for immediate payment or proposing a payment plan to demonstrate reasonableness.

2. Allow reasonable time for response

Patience here protects your position. Rushing to court before the deadline expires can see judges reduce your recoverable costs or adjourn proceedings.

What constitutes reasonable time:

• Standard debts: 14 days minimum from receipt for claims under £10,000, as per the Protocol.
• Complex disputes: 30 days if the debtor raises legitimate questions requiring investigation or document review.
• Insolvency indicators: If the debtor appears insolvent, act faster. Waiting risks other creditors securing assets first through business-to-business debt recovery actions.
• Partial offers: If they propose instalment payments, evaluate whether accepting avoids greater loss through lengthy litigation.
• Silence: No response often signals either financial distress or tactical delay; prepare your next escalation step.

Escalation options

When formal demands fail, you need leverage that creates genuine commercial pressure without immediately incurring court costs.

1. Engage mediation or alternative dispute resolution

Mediation resolves disputes faster and cheaper than litigation, particularly when ongoing business relationships matter or the debtor raises legitimate concerns about your work quality.

Benefits of alternative dispute resolution:

• Speed: Most commercial mediation concludes within 4-6 weeks versus 6-12 months for court proceedings through trial.
• Cost control: Mediator fees (typically £150-£300 per hour split between parties) remain far below solicitor litigation costs.
• Confidentiality: Unlike court judgments that appear on public registers, mediation settlements remain private, protecting both parties’ reputations
• Flexibility: You can negotiate payment plans, partial settlements, or even offset debts against future work rather than binary win/lose outcomes.
• Preserved relationships: Essential when the debtor is a regular client or operates in your industry network where B2B debt collection disputes damage future opportunities.

2. Issue a statutory demand

A statutory demand is the nuclear option for unpaid invoices over £750. It gives the debtor 21 days to pay or face potential insolvency proceedings.

How statutory demands create pressure:

• Insolvency threat: Failure to pay or dispute within 21 days provides grounds to petition for the debtor’s winding-up (companies) or bankruptcy (individuals).
• Credit rating impact: Even without following through, the threat alone often prompts immediate payment to avoid insolvency proceedings on their record.
• Director liability: Company directors risk personal liability and disqualification if they allow trading while insolvent after receiving a valid demand.
• No court fee required: Unlike issuing a claim, statutory demands cost nothing beyond preparation, making them cost-effective for business-to-business debt recovery.

Legal proceedings

When all else fails, court action converts your debt into a legally enforceable judgment with powerful collection mechanisms.

1. Small claims or fast track

Understanding which court track applies determines your costs, timescales, and whether you need legal representation for B2B debt collection.

How claims are allocated:

• Small claims track: Debts under £10,000 are heard informally, usually without solicitors. Court fees are recoverable but not legal costs, making DIY representation viable.
• Fast track: Claims £10,000-£25,000 follow streamlined procedures with fixed trial dates within 30 weeks. Limited legal costs are recoverable, typically capped at £1,000-£2,000.
• Multi-track: Debts over £25,000 enter full litigation with case management conferences, disclosure, and substantial recoverable costs. Solicitor representation becomes essential.
• Online claims: Money Claims Online (MCOL) handles straightforward unpaid invoices up to £100,000 entirely digitally, reducing court fees and administrative burden.
• Judgment in default: If the debtor ignores your claim, you obtain judgment automatically within 14-28 days without attending court.

2. High Court enforcement

County Court judgments are difficult to enforce. Transferring to the High Court for debts over £600 unlocks significantly more effective collection tools.

Why High Court enforcement works:

• High Court enforcement officers: More powerful than County Court bailiffs; they can force entry to commercial premises and seize assets for business-to-business debt recovery.
• Higher success rates: HCEOs recover approximately 70% of transferred debts versus 30% for County Court bailiffs through more assertive tactics.
• Charging orders: Secure your judgment against the debtor’s property. If they sell, you’re paid from proceeds before the owner receives anything
• Third-party debt orders: Freeze and seize money directly from the debtor’s bank accounts without their consent or prior warning.
• Winding-up petitions: For debts over £750 with an unsatisfied judgment, petition to liquidate the company; directors often pay immediately to avoid this.

FAQs

• What if the debtor goes into administration? Register your claim immediately with the administrator. Check for retention of title clauses or personal guarantees, otherwise you rank as an unsecured creditor behind secured lenders.
• How long can I wait before losing my right to claim? Six years from the due date under limitation rules. However, prompt action within months maximises recovery.

Unpaid invoices drain cash flow and waste valuable time. UK law provides powerful B2B debt collection tools, from statutory interest to court enforcement, but timing matters. Act decisively, follow the correct procedures, and escalate strategically to recover what you’re owed.

Stop chasing. Start recovering.

Qredible’s network of specialist solicitors in debt recovery and collection offer expert guidance on business-to-business debt recovery.

KEY TAKEAWAYS:

• Review your contract, calculate statutory interest (8% plus base rate), and gather evidence before pursuing unpaid invoices to establish a solid legal foundation.
• Send formal demands following the Pre-Action Protocol, then escalate through mediation or statutory demands to pressure payment without immediate litigation costs.
• Pursue court proceedings when needed and transfer judgments to High Court for enforcement using powerful tools like charging orders for effective business-to-business debt recovery.