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Business Debt Recovery: How to Reduce the Risk of Late Payments

21 September 2026

Late payments can put pressure on businesses. Lesley Curtis, Associate in our Debt Recovery team, shares some practical steps to help reduce the risk.

Late payments can put real pressure on a business. Even when your business is doing well, having customers or clients who don't pay on time can create cashflow problems and make it harder to meet your own financial commitments.

Approximately 75% of UK businesses are being paid late. For some businesses, persistent late payment can lead to serious financial difficulties and, in some cases, contribute to insolvency.

While it isn't possible to prevent every late payment, there are steps you can take to reduce the risk of bad debts building up and deal with unpaid invoices promptly.

1. Have a clear credit control process

Don't wait for an overdue invoice to become a bigger problem.

A clear credit control procedure can help you deal with late payments consistently:

• Send a payment reminder as soon as an invoice becomes overdue.
• Follow up with a telephone call to find out whether there is a dispute or another reason for the delay.
• If the agreed credit control period has passed and payment still hasn't been received, consider taking further action rather than allowing the debt to remain outstanding.

Acting promptly can make a significant difference to the likelihood of recovering what you're owed.

2. Know who you're doing business with

Before entering into a business relationship, it's important to understand exactly who you are contracting with.

Consider:

• Finding out as much as possible about the customer or client.
• Checking whether you're dealing with a sole trader, partnership or limited company.
• Making sure you identify the correct legal entity rather than relying solely on a trading name.
• Carrying out credit checks where appropriate.

These checks can help you make more informed decisions about who you offer credit to, and the level of risk involved.

3. Make sure your Terms & Conditions are clear

Your Terms & Conditions should clearly set out when payment is due and what happens if an invoice isn't paid on time.

You should consider including:

• Clear payment terms.
• The rate of interest that may apply to late payments.
• Details of any agreed credit terms.
• Appropriate Order Forms, Booking Forms or agreements.
• 3Clear credit application documentation.

For some businesses, it may also be appropriate to consider directors' guarantees when dealing with a limited company. The right approach will depend on your circumstances and the nature of the business relationship.

Having clear documentation in place from the outset can make it easier to take action if a customer fails to pay.

4. Try to protect your business relationships

Recovering a debt doesn't necessarily have to mean damaging an otherwise good business relationship.

Where possible, a sensible and proportionate approach can help preserve relationships with customers while still making sure that money owed to your business is addressed.

For example, a customer may be experiencing temporary financial difficulties rather than deliberately refusing to pay. Understanding the reason for non-payment can sometimes help you find a practical solution.

However, this doesn't mean allowing debts to remain outstanding indefinitely. If attempts to resolve the situation have been unsuccessful, taking appropriate legal action may be necessary.

How can our Debt Recovery team help?

If a customer or client owes your business money, taking action sooner rather than later can help prevent the debt from becoming more difficult to recover.

Our Debt Recovery team can advise businesses on the options available for recovering outstanding debts and help you take the appropriate steps.

We can also help you put appropriate Terms & Conditions and credit documentation in place to reduce the risk of problems arising in the future.

If you're dealing with an unpaid invoice or are concerned about a growing business debt, please do not hesitate to get in contact with Lesley Curtis in the first instance.

Call us on 01202 294411 or contact us via our website to arrange a consultation with a member of our Debt Recovery team: Contact Us AB Solicitors For Your Legal Needs

 

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