How to Chase an Unpaid Invoice from a UK Business: The 2026 Escalation Guide

If a UK business owes you money and has not paid, the legal framework is on your side. You are entitled to statutory interest at 11.75% per annum on the overdue amount, statutory compensation of £40, £70 or £100 per invoice depending on its size, and a structured pre-court process that most solvent debtors know they cannot ignore.

The problem is not the law. The problem is that most creditors chase informally for too long, escalate emotionally, and arrive at the doors of the county court with a case that is documented like a WhatsApp thread. Solvent debtors know this and use it against them.

This guide sets out, step by step, exactly how a well-run credit control process handles an unpaid B2B invoice, from the day it becomes overdue to the day the money hits your account. The numbers, statutes, and timings are all UK-specific and current for 2026.

You are welcome to use this guide as your own internal playbook. If at any point the process outgrows what you have time or expertise to run yourself, this is exactly what we do at TRDG Commercial Credit Management on a no-recovery-no-fee basis.

The 30-Day Rule Most SMEs Don't Know

When two UK businesses trade and no payment terms are written down, the Late Payment of Commercial Debts (Interest) Act 1998 provides a default. Payment is due 30 days after the later of:

1. The day the goods or services are supplied
2. The day the buyer receives the invoice

If your contract or invoice specifies different terms (14 days, 60 days, end of month plus 30), those terms usually apply instead. But the 1998 Act sets a ceiling: any payment term longer than 60 days in a commercial contract can be challenged as "grossly unfair" unless expressly agreed and objectively justified.

This matters for two reasons. Firstly, it means you do not need a payment terms clause to charge interest. Interest and compensation are statutory rights that apply automatically once the debt is late. Secondly, it means many "we do not pay until 90 days" claims from difficult customers are, in fact, legally unenforceable.

Two definitions to hold onto for the rest of this guide:

• Commercial debt is money owed by one business to another in the course of business. It excludes consumer debt (individuals buying for personal use), which is governed by an entirely different regulatory framework (the FCA Handbook).
• Late payment begins the day after the payment due date, not the day after the invoice date.

Days 1 to 7: Friendly Confirmation

The first week after the due date is not a debt recovery exercise. It is an administrative confirmation exercise. The most common reasons an invoice sits unpaid at this stage are entirely benign: the invoice went to spam, the finance contact was on leave, or the purchase order reference is missing.

What to do

Send a short, professional email to your usual contact and cc the accounts inbox if you have one.

Subject: Invoice [number] due [date] · [your company name]

Hi [name],

Just following up on invoice [number] for £[amount], which was due on [date]. I want to make sure it has landed on the right desk and there is nothing outstanding at your end. Could you confirm it is in the payment run?

Thanks,
[Your name]

What not to do

Do not phone. Not yet. Phone calls at this stage feel intrusive to a good customer and give a bad one an opportunity to say something vague ("yeah, should be sorted this week") that later evaporates. Email creates a paper trail from day one. You will need that paper trail.

Do not apologise for chasing. It is your money.

Do not threaten. Threatening at day 3 is unprofessional and undermines the escalation you may need later.

Days 8 to 30: Structured Follow-Up

If day 7 passes without payment or a substantive reply, the invoice moves from "administrative confirmation" to "structured follow-up." The tone shifts from friendly to professional-firm. The cadence tightens.

The rules of engagement

Everything in writing. If the debtor calls you, take the call politely, then follow up with an email that says: "As discussed on today's call, you confirmed that [X]. I will expect [Y] by [date]." Their silence in response to that email becomes evidence.

One touch per week. More than that reads as harassment. Less than that reads as apathy.

Escalate the tone, not the volume. Week two: "Following on from my email of [date], I have not yet had confirmation on the payment date." Week three: "Invoice [number] is now [X] days overdue. Please respond by [date] with a firm payment date."

Ask specific questions. "Is there a problem with the invoice, or is it in your next payment run?" is a professional question that requires a specific answer. A debtor who cannot answer that question is telling you something.

The two-tier communication approach

By day 14, your usual contact should not be the only person you are speaking to. Cc a director, the finance director, or the accounts payable inbox. This is a signal, not an accusation. It tells your usual contact that the matter has escalated, and it tells the finance function that someone is watching.

By day 21, if you still have not received a firm payment date, request one in writing. Not an intention. A date.

By day 30, you either have payment, a firm dated commitment, or you are about to formalise.

Day 31 Onwards: When to Formalise

The 30-day mark is when a well-run process shifts from credit control into formal recovery. If you have followed the previous steps, you now have:

• A dated paper trail of at least four or five written communications
• Confirmation that the debtor received the invoice
• A record of unfulfilled promises or unanswered questions
• Zero informal grounds for the debtor to claim confusion or dispute

You are ready to send a First Formal Demand.

What the First Formal Demand must contain

A First Formal Demand is not a legal document in itself, but it is the first document in what may become a legal file. It should be structured, dated, and unambiguous. It must contain:

1. A clear identification of the debt: invoice numbers, dates, and amounts
2. A statement that payment is now formally demanded
3. A clear deadline (typically 7 working days from the letter date)
4. A statement that statutory interest and compensation will now begin to accrue (see the next section)
5. A statement of the consequences of non-payment: further escalation and, ultimately, court proceedings
6. A reservation of rights: any personal guarantee, security, or contractual remedy is preserved
7. Bank details for payment and a clear reference

The First Formal Demand should be sent both by email (for speed and evidence of receipt) and by first-class post (for legal service). Keep a Post Office proof of posting slip on file. It is free and it is essential.

Statutory interest kicks in

From the day after the invoice due date, you are entitled to charge statutory interest under section 6 of the Late Payment of Commercial Debts (Interest) Act 1998.

The rate is 8% plus the Bank of England Bank Rate (gov.uk guidance). The Bank Rate on 30 June 2026 was 3.75% (Bank of England), which fixes the statutory rate at 11.75% per annum for all commercial debts becoming late between 1 July and 31 December 2026.

The daily rate on a £5,000 invoice at 11.75% is £1.61. On a £25,000 invoice it is £8.04. The purpose of statutory interest is not to make you rich. It is to make late payment more expensive than early payment. Applied consistently, it changes debtor behaviour.

Statutory compensation

Under section 5A of the same Act, you are also entitled to fixed compensation per late invoice, over and above interest. The amounts, taken verbatim from gov.uk, are:

Amount of debt	Compensation per invoice
Up to £999.99	£40
£1,000 to £9,999.99	£70
£10,000 or more	£100

If a single case involves five overdue invoices, you are entitled to compensation on each one separately. On a case with £8,000 outstanding across four invoices, that is £280 of compensation before interest is even calculated.

Reserved rights

If a director signed anything that could be characterised as a personal guarantee (an email undertaking, a stated intention to "step in personally", a personal payment from their own account against the company invoice), the First Formal Demand should reserve the right to pursue that guarantee in any subsequent proceedings. Do not enforce it yet. Do not name individual directors as personally liable yet. Reserve the right to do so.

This is a calibrated escalation. The tone is professional and factual. The commercial pressure is real, because a director who understands they may be personally on the hook behaves differently from one who thinks they are hiding behind the company.

The Second Demand and the Letter Before Action

If the First Formal Demand's deadline passes without payment or a substantive dispute, you have two more calibrated escalations before court.

Second Formal Demand

Issued approximately 7 days after the First Formal Demand's deadline expires. This letter:

• References the earlier demand
• Confirms that no payment or substantive dispute has been received
• Treats the debt as admitted and undisputed
• Applies the statutory interest and compensation calculated to date
• Sets a new deadline (typically 7 days)
• States that a Letter Before Action will follow if payment is not received
• Continues to reserve any personal guarantee or security rights

The Second Demand is where you escalate the money side (updated total, running daily interest) without escalating the person side (still no personal naming, still reserved rights only). It is the last opportunity for the debtor to settle quietly.

Letter Before Action

The Letter Before Action (LBA) is the final step before court. It is issued under the Practice Direction on Pre-Action Conduct and Protocols, which governs all civil claims where no specific pre-action protocol applies.

Important: The Pre-Action Protocol for Debt Claims, introduced in 2017, does not apply to business-to-business debts unless the debtor is a sole trader. For company-to-company debts, the general Practice Direction on Pre-Action Conduct is the framework the court expects to see followed.

The LBA is not a "seven-day letter". It gives the debtor 30 days to respond, in line with the Practice Direction's expectations of a reasonable response window. During those 30 days, the debtor may:

• Pay in full
• Propose a payment plan
• Substantively dispute the claim
• Request the case be referred to alternative dispute resolution (ADR)

If none of the above happens within 30 days, court proceedings may be issued.

Why the format of the LBA matters

Courts penalise creditors who fail to follow the Practice Direction on Pre-Action Conduct. Under paragraph 15 of the PDPAC, non-compliance can result in:

• The claimant paying the defendant's costs
• Costs being awarded on an indemnity basis
• The claimant being deprived of interest on the award
• The claimant being awarded interest at a lower rate

Conversely, a defendant who fails to engage with the LBA (silence, refusal to consider ADR) can be penalised too: interest at up to base rate plus 10% on the awarded sum.

An LBA drafted to the exact format the court expects (clear amount, calculation basis, evidence bundle, ADR offer, 30-day response window) is often the piece of correspondence that finally produces payment. Solvent debtors read them, understand what is coming next, and pay.

When to Bring in a Specialist

The escalation process described above can be run entirely in-house. Many SMEs do exactly that and succeed. But there are five specific situations where bringing in a commercial recovery firm materially improves the outcome.

1. The debtor is playing you

Repeated promises of payment "next week" that never materialise. Partial payments designed to keep you engaged but not resolved. Requests for statements, then requests for reissued invoices, then requests for the original PO. This is deliberate delay, and a third party letter cuts through it because the debtor knows the game is up.

2. The debt is old

Once a commercial debt is more than 6 months overdue, the probability of self-recovery falls sharply. Your usual contact has moved on, records are archived, and the case has slipped down the finance function's priority list. A structured external escalation resets the clock.

3. There is a personal guarantee to enforce

Personal guarantees are technical instruments. To be enforceable they typically need to be in writing, signed, and comply with the Statute of Frauds 1677. Enforcing one badly can weaken the entire claim. If you have evidence of a director's personal exposure, get it properly evaluated before you deploy it.

4. Multiple invoices, multiple debtors

Anything past a handful of concurrent recovery cases exceeds what a small business can realistically run in-house alongside its actual trading operations. Specialist firms industrialise the process: templated escalation, diarised deadlines, automated interest calculation, court-ready documentation.

5. You need to preserve the commercial relationship

Counter-intuitively, this is when outsourcing helps most. If the debtor is a customer you want to keep once the current invoice is settled, an external recovery firm can be the "bad cop" that gets the money in while you remain the "good cop" on the future account. Handled properly, the customer thanks you for being professional about it.

What no-recovery-no-fee actually means

At TRDG Commercial Credit Management we work on a no-recovery-no-fee basis for commercial debt recovery. In plain terms: if we do not recover the balance, no commission is due. Our fee is a percentage of what we successfully recover, agreed with you in writing before we start.

Court fees, where a case escalates that far, are separate and are always agreed with you in writing before they are incurred. You never receive a surprise invoice.

The rate depends on the size and age of the debt. Send us the details of the case and we will come back within one working day with the commission rate in writing, a letter of authority for signature, and a clear assessment of whether the case is worth pursuing at all.

When to Write It Off

Not every unpaid invoice is commercially recoverable. It is a serious mistake to pursue a debt that will not be recovered, because the emotional cost, the internal time, and (if it goes to court) the legal costs eventually exceed the debt itself.

The three situations where writing off is the correct decision:

The debtor is genuinely insolvent

Check The Gazette for winding-up petitions and liquidation notices against the debtor company. Check Companies House for filed accounts, late filings, and director resignations. If the company is in a formal insolvency process, register as a creditor immediately and treat the money as gone.

The paper trail is insufficient

If your original engagement was oral, if the invoices were issued for work that was never quite signed off, if there are unresolved variations that the debtor can point to as disputes, a court claim is high-risk. Sometimes it is better to close the file and update the process for next time.

The cost of pursuit exceeds the likely return

A £2,500 debt against a small limited company is not usually worth court proceedings, because the court issue fee, hearing fees, and time cost can add up to £1,000 before you have even filed. Solvent commercial debtors of that size normally pay at the demand-letter stage. If they do not, escalation may not be economic.

Writing off for tax

A properly documented bad debt can be claimed as a business expense against corporation tax (for limited companies) or against self-employment income (for sole traders and partnerships). HMRC's guidance on bad debt relief is clear on the criteria: the debt must be reasonably estimated to be irrecoverable and must have been included in taxable trading income when it was invoiced.

Writing off is not defeat. It is a commercial decision.

Three Anonymised Case Studies

The following three examples are drawn from real cases handled by TRDG Commercial Credit Management. Names, sectors, amounts, and locations have been changed so no client or debtor is identifiable.

Case 1: The £4,800 marketing agency debt

Sector: Boutique marketing agency (creditor) vs mid-sized regional retailer (debtor)
Debt: £4,800 across three unpaid invoices, oldest 62 days overdue
Outcome: Recovered in full within 18 days of TRDG instruction

The agency had been chasing the retailer's marketing manager politely for two months. Every reminder produced a "sorry, I'll chase finance" response. When TRDG issued the First Formal Demand, addressed to the managing director with the marketing manager cc'd, the finance function responded within 48 hours confirming payment was being processed. The pattern is telling: the debtor's own internal politics were the delay. An external letter, addressed to the right person, resolved it in two working days.

Case 2: The £27,000 construction sub-contract

Sector: Specialist trades sub-contractor (creditor) vs main contractor (debtor)
Debt: £27,000 for completed installation work, 4 months overdue
Outcome: Settled at £24,500 within 6 weeks

This case included a substantive dispute over a scope-of-works variation. The main contractor was refusing to pay until "everything was finalised". TRDG issued a Second Formal Demand, calculated to date with statutory interest applied, and offered ADR (mediation) as an alternative to court. The main contractor engaged, and a settlement was reached at £24,500 (approximately 91% of the claim), plus the sub-contractor recovered £8,200 in accumulated interest and compensation, giving a net outcome above the original invoice value.

The lesson: statutory interest and compensation, applied consistently, often more than offset a settlement discount on the principal.

Case 3: The £1,650 debt that should have been written off

Sector: SaaS platform (creditor) vs consultancy (debtor)
Debt: £1,650 across two invoices, 5 months overdue
Outcome: File closed at TRDG's suggestion; £1,650 written off

The consultancy had ceased trading, with a director resignation filed at Companies House and no successor company. TRDG's initial assessment identified the insolvency risk within 48 hours. Rather than incur the client's time and TRDG's minimum casework cost on an unrecoverable debt, we suggested immediate write-off. The client processed a bad debt tax relief claim on the £1,650 and updated their credit check process for future consultancy engagements.

The lesson: knowing when to walk away is as valuable as knowing how to pursue.

Your Escalation Checklist

The full recovery process in one view:

Stage	Timing	Action
Invoice sent	Day 0	Payment due 30 days later (default)
Payment due	Day 30	Payment expected
Friendly confirmation	Days 31 to 37	Short, professional email to usual contact + accounts cc
Structured follow-up	Days 38 to 60	Weekly written escalation, cc director/finance from day 44
First Formal Demand	Day 61	Statutory interest and compensation applied; 7-day deadline
Second Formal Demand	Day 68	Updated totals; last chance before court process
Letter Before Action	Day 76 onwards	30-day formal notice under PDPAC; court eligible after 30 days
Court claim	Day 106 onwards	If unresolved

Total elapsed time from invoice to court-eligible: approximately 3.5 months.

Total effort if run externally on a no-recovery-no-fee basis: your time is limited to sending the initial case brief, signing the letter of authority, and reviewing settlement offers.

Getting Started

If you have an unpaid B2B invoice and would like a case assessment, send the balance, the age of the invoice, and a short summary to enquiries@trdgcommercial.co.uk. We will come back within one working day with a clear opinion on whether the case is worth pursuing, a commission rate in writing, and a letter of authority for signature if you decide to proceed.

We work on a no-recovery-no-fee basis. If nothing is recovered, no commission is due. If a case is not worth pursuing, we say so plainly and close the file.

Contact TRDG Commercial Credit Management · See our services and fees · Read our approach