Commercial Debt Recovery: What is it and how can it help your business?

13th September 2021


Non-payment and late payment of invoices can hinder a company's cash flow significantly. Due to the ongoing financial consequences of the COVID-19 restrictions, this is perhaps more of an issue to companies now than ever before. It is estimated that disruption caused by COVID-19 will result in circa £8.5bn in unpaid invoices being written off as bad debts in 2021.

What is Commercial Debt Recovery?

Commercial debt recovery is the process by which a company's unpaid invoices are recovered from the party obliged to make payment. The usual process to recover such debts is governed by the Late Payment of Commercial Debts (Interest) Act 1998 (the Act). When a payment is late, and the contract is covered by the Act, it is possible to maximise the amount recovered from the non-paying party by also claiming interest and debt recovery costs.

When is a payment late?

If a specific payment date has not been agreed between the parties, then the Act mandates that, in most circumstances the payment is deemed to be late 30 days after either:

1.     The customer received the invoice; or

2.     You deliver the goods or provide the service (if this is later than the date the customer receives the invoice).

If a payment date has been agreed, then the usual position under the Act is that payment must be made within 60 days. After which it is deemed as late.

What happens when a payment is deemed as late?

When a payment becomes late, it is possible to also claim interest and debt recovery costs, in addition to the outstanding invoice. Unless the contract between the parties states a specific rate of interest that is to be applied to any outstanding invoices, then interest can be claimed under the Act at 8% plus the Bank of England base rate.

The Act also allows for debt recovery costs to be recovered which, in some instances, can effectively negate any legal costs incurred in the debt recovery process. This includes statutory late payment compensation plus reasonable debt recovery costs incurred.

How BHP Law can support you

The Dispute Resolution team at BHP Law are experts in commercial debt recovery, with a proven track record of achieving excellent results for our clients in an expedient manner. We can guide you on every aspect of the debt recovery process, from advising upon your terms of business and credit control procedures, to sending a compliant letter of claim, issuing court proceedings, and recommending enforcement options. We can also represent you in insolvency actions.

We understand a tactical approach is required when seeking payment of debts from your customers. We aim to recover your debts, plus interest and debt recovery costs without the need for costly litigation whilst also keeping your relationship with your customer intact.

If you have any unpaid invoices that you are struggling to recover, get in touch with the team today to see how we can help you on 01325 466 794. 

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