Debt Recovery

Clear communication is often all it takes to settle an invoice, which is why late payment letters are so important to the debt recovery process. You should have a clear policy in place for overdue payments, such as: 

✔️ Following up non-payments with a friendly letter, email or phone call. 
✔️ Reminding your clients about the payment terms in your contract. 
✔️ Applying interest to encourage prompt payments.  
✔️ Advising your client that you’ll be pausing all future work until invoices are paid.

Our debt recovery experts are just a phone call or click away to advise members, whether you’re dealing with a one-off customer or fighting the tactics of a regular late payer. 

A letter before action warns the late payer that if payment is not made, you’ll be willing to take legal action and the letter is the first step in the legal process. It’s sent when you’ve already taken steps to try and recover the debt, like frequent phone calls, adding interest, offering payment plans and sending late payment demands. 

FSB members can access a free template through FSB Debt Recovery on our online Legal Hub, or you can instruct a legal expert from Markel Law to write and send it for them for a discounted fee.  

Unlike a letter before action, which warns of imminent legal action if no payment is made, a late payment demand lets you claim interest and compensation under the Late Payment of Commercial Debts (Interest) Act 1998 in addition to the principal sum. 
 
If an LPD has been sent and the debtor fails to pay, an LBA should then be sent, giving the debtor a final deadline in which to make payment and providing certain other information as to the debt that the Court expects to be provided before formal action is taken. 

FSB Debt Recovery provides you with a free, downloadable Pre-Action Protocol compliant letter before action (LBA) and a late payment demand letter (LPD) so you can choose what’s right for your circumstances. 

Many smaller firms add in terms of interest on overdue invoices into their contracts to deter late payments. In the absence of such a clause, statute provides for a default rate of interest to be added, which depends on whether the debtor is a company or an individual. 

Ultimately, your decision will come down to the relationship you have with the business that owes you money. Our members can quickly work out how much interest you might charge with our free late payments calculator.  

Debt claims must be brought within 6 years of the sums falling due or, if it occurred later, the debtor’s last acknowledgment of the debt. Otherwise they will be statute-barred and become unenforceable. At that point, they should be written off as a bad debt.

The FSB Legal Hub has a dedicated debt recovery page that provides a range of resources for members, to help you reduce aged debt and recover overdue invoices. This includes a free guide with tips on how to resolve issues with late paying customers and provides details of the debt recovery process. 

You can also seek expert debt recovery advice from a team of dedicated lawyers via the 24/7 legal helpline. Alternatively, if you’re unsure or think the letter would carry more weight coming from solicitors, you can instruct a legal expert from Markel Law to write it for you for a discounted fee.