Debt Recovery: Recovering Unpaid Invoices

An unpaid invoice can have an impact beyond a business's accounts. It can affect cash flow, take up management time and sometimes put a strain on the relationship with a customer.

For smaller businesses, a significant overdue invoice can be particularly difficult. Wages, supplier invoices and other business costs still need to be paid, even when money owed to the business has not arrived.

Recovering an unpaid invoice can also be uncomfortable, particularly where the customer is well established or there is an ongoing business relationship. However, an overdue invoice does not necessarily resolve itself simply by being left outstanding.

When an unpaid invoice becomes a problem

Late payment can become an ongoing issue if invoices are repeatedly paid after their due dates. For businesses, keeping track of outstanding invoices and following up on overdue accounts forms part of ordinary credit control.

Records can also become important where payment is not forthcoming. Contracts, terms and conditions, quotations, purchase orders, invoices and correspondence may all be relevant if there is later a disagreement about what is owed.

An initial payment reminder may be enough to resolve a straightforward oversight or administrative delay. Where payment remains outstanding, a business may then consider whether further steps are appropriate.

How a solicitor's letter can help

A solicitor's letter is one option available when an invoice remains unpaid.

A formal letter can set out the amount being claimed, the basis of the debt and what is being requested from the debtor. Depending on the circumstances, it may also deal with matters such as interest or other sums that may be recoverable.

Receiving correspondence from a solicitor can make clear that the unpaid invoice is being treated as a formal matter rather than simply an outstanding account.

There are also pre-action requirements that can apply before court proceedings are issued. These requirements vary according to the circumstances and the type of claim involved.

What happens if the debt is disputed?

Not every unpaid invoice is a straightforward debt.

A customer may dispute an invoice for a number of reasons. They may say that goods were defective, services were incomplete, the price was different from what they understood, or that the work did not meet the agreed requirements.

There may also be questions about the terms of the contract, changes to the original agreement, set off or when payment became due.

Where an invoice is disputed, the relevant documents and correspondence can help establish what was agreed and what happened. These may include:

• signed agreements and terms and conditions;
• quotations, estimates and purchase orders;
• invoices and account statements;
• delivery notes or records of completed work;
• emails, messages and meeting notes;
• complaints and responses; and
• admissions or promises to pay.

Depending on the circumstances, a disputed debt may be dealt with through correspondence or negotiation. Mediation is another possible route. Where a dispute cannot be resolved, court proceedings may ultimately be considered.

The process will depend on the individual circumstances of the debt and the nature of the dispute.

Why timing can matter

The passage of time can affect debt recovery. Documents may become more difficult to locate, people's recollections can change and a debtor's financial circumstances may also change.

Legal time limits can apply to claims for unpaid debts. The applicable limitation period will depend on the circumstances of the particular claim.

Taking advice at an early stage can help a business understand the position and the options that may be available. It may also provide an opportunity to consider whether the matter can be resolved without court proceedings.

How Fieldings Porter Solicitors can help

Dealing with unpaid invoices can take time and can become a distraction for business owners and managers.

Fieldings Porter Solicitors can assist with debt recovery matters, including correspondence with debtors, negotiations and, where appropriate, consideration of court proceedings.

Every debt is different. Whether an invoice is simply overdue or there is a dispute about the amount owed, the circumstances and supporting documents will be relevant to the available options.

For assistance with an unpaid invoice or disputed debt, contact our Litigation Department on 01204 540 900 or at info@fieldingsporter.co.uk.