How to Get People to Pay: Structured Recovery Beats Aggression
Chasing harder rarely collects faster. A fixed escalation calendar, statutory interest applied by default and an honest decision point do — and they cost less.
Problems, in order · Part of Outsourced General Counsel
Dinmore Bell's position is that aggression rarely collects. Structured recovery does: clean payment terms, a fixed escalation calendar, statutory interest and compensation applied automatically, a compliant letter before claim, and a decision point where the debt either goes to enforcement or gets written off. Make paying the path of least resistance rather than the loudest conversation.
Bad debt is the reason a lot of founders call us. Not a dispute, not litigation — just a ledger with four or five names on it that have quietly stopped answering, and a payroll run in eleven days.
The instinct is to escalate emotionally. Send the angry email. Threaten to "take legal action" without knowing what that means or costs. Ring the founder's mobile at 8pm. It occasionally works on someone who was always going to pay. On everyone else it does two things: it tells the debtor you are improvising, and it hands them a grievance to hide behind.
Structured recovery works because it removes discretion. The debtor is not deciding whether to pay you; they are deciding which of several creditors to pay first. Your job is to be the creditor whose process is predictable, documented and unpleasant to ignore — not the one who is loudest.
Start before the invoice
Most recovery problems are contracting problems that surfaced ninety days late.
Under the Late Payment of Commercial Debts (Interest) Act 1998, business-to-business payment terms cannot normally exceed 60 days unless a longer term is expressly agreed and is not grossly unfair to the supplier; for public authorities the limit is 30 days (gov.uk). If your terms are silent, statutory interest starts running 30 days after the later of delivery or the customer receiving the invoice. That default is your friend. Do not contract out of it casually.
Second, know who you are selling to before you sell. Large UK companies — those exceeding two of three thresholds: £36m turnover, £18m balance sheet total, and 250 employees — must report their payment practices and performance twice a year, and the data is published on a public register (gov.uk). You can look up a prospective customer's average time to pay before you agree terms. A business that reports 74 days average will pay you in 74 days regardless of what your invoice says.
Third, sole traders and individuals are treated differently from companies once things go legal. The Pre-Action Protocol for Debt Claims applies where the creditor is a business and the debtor is an individual, including sole traders, and requires a detailed Letter of Claim with a reply form and 30 days to respond before proceedings (Ministry of Justice). Skip it and the court can penalise you on costs. Know which category your debtor sits in on day one.
The escalation calendar
Write it once, apply it to everyone, never deviate. A workable version:
Day 0 — invoice issued, addressed to a named individual with a purchase order reference, sent to accounts payable and to the person who commissioned the work.
Day 7 — automated confirmation of receipt and approval. This one step kills the "we never received it" defence, which is the single most common stall.
Due date + 1 — short, unemotional reminder. State the statutory position: interest and compensation now accruing.
Due date + 14 — apply the statutory entitlement and show it on the ledger. Statutory interest is 8% plus the Bank of England base rate, and you can also claim fixed compensation of £40 for debts under £1,000, £70 for debts of £1,000 to £9,999.99, and £100 for debts of £10,000 or more — plus reasonable recovery costs above that fixed sum if they exceed it (gov.uk). Founders routinely waive this. Don't. It is the only lever that makes you more expensive to ignore than the next creditor.
Due date + 30 — the commercial conversation. Offer a documented instalment plan with an acceleration clause. A signed plan also restarts the limitation clock on written acknowledgement, which matters more than most people realise.
Due date + 45 — Letter before claim. Protocol-compliant if the debtor is an individual or sole trader.
Due date + 75 — decision point. Issue, or write off. No third category.
The decision point is the whole discipline
The debts that kill cashflow are not usually the ones that go to court. They are the ones that sit in a spreadsheet for two years, consuming a founder's Sunday evenings and a bookkeeper's Tuesdays, and are eventually written off anyway.
So cost the decision properly. In England and Wales, the issue fee for a money claim between £10,000 and £200,000 is 5% of the value of the claim, and the fee is recoverable from the debtor if you win (gov.uk, EX50). Against that, set the realistic recovery rate — which turns on one question: does the debtor have assets, and will they still have them in nine months?
Because a judgment is not money. It is permission to try to get money. Enforcement in England and Wales runs through warrants and writs of control, attachment of earnings, third party debt orders and charging orders, and each has its own fee and its own failure mode (gov.uk). County Court judgments of £600 or more can be transferred to the High Court for enforcement by High Court Enforcement Officers, and judgments of £5,000 or more must generally be enforced in the High Court unless the debt arises under a regulated consumer credit agreement (gov.uk).
The insolvency route is separate and should be used sparingly. A statutory demand can be issued where a company owes £750 or more, or where an individual owes £5,000 or more (gov.uk). It is a genuine pressure point against a solvent debtor who simply will not pay. It is worthless — and can expose you to costs — against one who is genuinely disputing the debt or genuinely broke.
And there is a hard stop. Under section 5 of the Limitation Act 1980, an action founded on simple contract cannot be brought after six years from the date the cause of action accrued (legislation.gov.uk). In Scotland, the prescriptive period for most contractual obligations is five years under the Prescription and Limitation (Scotland) Act 1973 (legislation.gov.uk).
The UAE position
Founders operating between the two jurisdictions apply the wrong playbook constantly.
Cheque dishonour in the UAE was substantially decriminalised with effect from 2 January 2022; a bounced cheque now functions as a writ of execution, allowing the holder to apply directly to the execution judge without first obtaining a judgment on the merits (u.ae). That is a faster and cheaper route than most UK equivalents — if you took the cheque.
In the DIFC, the Small Claims Tribunal hears claims up to AED 500,000, and higher-value claims where the parties agree in writing to its jurisdiction (DIFC Courts). Where your contract permits it, that election is worth making at drafting stage rather than at recovery stage.
Where a specialist is needed
Issuing proceedings, conducting litigation and advocacy in the courts of England and Wales are reserved legal activities. Dinmore Bell does not conduct them. Where a claim needs to be issued, a solicitor or a licensed litigator is instructed, and in the UAE a locally licensed advocate. The same applies to insolvency petitions, security enforcement and any question of bad-debt VAT relief or write-off treatment, which is a tax filing position for your accountant.
What Dinmore Bell does is hold the ledger and the outcome: build the escalation calendar, fix the contractual terms that caused the problem, run the commercial conversations that settle most of these before anyone drafts a claim form, brief and budget the litigator on the ones that don't, and tell you plainly which debts to stop chasing.
That last one saves more cash than the chasing.
Common questions
- Should I charge late payment interest, or will it annoy the customer?
- Charge it. Statutory interest on commercial debts runs at 8% plus the Bank of England base rate, with fixed compensation of £40, £70 or £100 depending on the size of the debt, plus reasonable recovery costs above that (gov.uk). You can always waive it as a goodwill gesture when they pay. You cannot retrospectively create leverage you never claimed. The customers who will be annoyed are the ones already planning to pay you last.
- How long do I have to chase an unpaid invoice?
- In England and Wales, section 5 of the Limitation Act 1980 gives six years from when the cause of action accrued for a simple contract claim. In Scotland it is generally five years. A written acknowledgement of the debt or a part payment can restart the clock, which is one reason a signed instalment plan is worth more than a phone call.
- Is a statutory demand a good way to force payment?
- Only against a debtor who can pay and is choosing not to. You can serve one where a company owes £750 or more, or an individual owes £5,000 or more (gov.uk). Used against a genuinely disputed debt it can be set aside with costs against you, and it is an abuse of process to use insolvency procedure as a debt collection tool where the debt is properly in dispute.
- Do I have to send a formal letter before claim?
- If your debtor is an individual or a sole trader, the Pre-Action Protocol for Debt Claims requires a detailed Letter of Claim with an information sheet, reply form and 30 days to respond. For business-to-business debts the general Practice Direction on pre-action conduct applies. In both cases, courts can penalise a claimant on costs for skipping it, so the letter is cheaper than the shortcut.
- When should I just write the debt off?
- When the cost and management time of recovery exceeds the realistic recovered amount after enforcement risk. Build the decision into the calendar at a fixed number of days so it is made once, in the cold, rather than repeatedly at midnight. The write-off treatment itself — including any bad debt VAT relief — is a filing position for your accountant, not something Dinmore Bell determines.
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