I have witnessed the associated stress and the cash flow of a company brought to a standstill when a customer’s debt isn’t paid. I would like to provide some advice on the debt collection process itself and how quickly it can work for you.


Decide quickly when it is a debt and not an overdue payment. An overdue payment might just need a nudge from you to the customer requesting payment. The most I recommend you allow your customer to be overdue is 7 days, before sending a nicely worded reminder letter.

If the customer has been with you for a while then you will know if there is a change in the payment behaviour. Trust your gut feeling! Maybe the customer paid on a regular day of the month or paid by card when you rang them? But now you can’t get hold of them or their perhaps payments have become irregular. This is the time to become serious about the debt collection process.

Your Formal Debt Collection Process

Once you decide that your customer isn’t paying after sending reminders and calls, it is time for your formal debt collection process to start. Each business has their own time frame of how many days to allow a customer to pay before starting this process. I personally allow customers to be 14 days’ past terms before starting the formal process.

If you have customers with debts as old as 5 years and you are hoping that someday they will pay the invoice…… They are not going to if it has taken this long! In fact they are not going to pay if it is more than a month overdue, not without a formal Notice Before Proceedings Letter.
This is the first part of the debt collection process and a well written NBP letter often does the trick. If the amount owed is less than £750 they can usually manage to raise this amount, “robbing Peter to pay Paul” in effect or using family and friends if necessary.

Nine times out of ten at this moment in time the bank will have stopped any further increase to their overdraft facility or won’t give them a loan. If the debt is for more than £750 I have found that this amount and over is the tipping point were a customer will ignore calls, emails and letters. The matter is now a serious one. So when you do send your NBP letter, make sure you include a date by which, “failure to pay will lead to court action.”

Still no response?

If your customer has not responded to the NBP letter then the next step is to start court action. Do this on the day after the deadline date included on your Notice Before Proceedings Letter (sometimes called a Letter Before Action).

Make sure at this point you have the correct address, you can enter both the trading and registered addresses when submitting court action.

Research the company you are taking court action against:

  • have they got any CCJ’s?
  • what is their credit rating like?
  • are they in a high-risk industry?
  • are the directors linked to other companies that have gone into administration?

These checks will give you some indication of how successful you may be when taking court action.

You will have court fees to pay which are repayable by your debtor if you obtain a county court judgment or win the case if it goes to a court hearing. However, if the debtor is likely to go into administration or already has county court judgments then the likelihood of you being successful is slim. In this instance you will foot the bill for the court fees.

Fixed Payment Plan Alternative

I have found that offering your customer a fixed payment plan (PP) or a time to pay arrangement (TTP) can be a great alternative to court action. Perhaps your customer is having a temporary cash flow problem? Maybe one of their own customers has not paid an invoice, which has a knock-on effect on payment to their creditors.

The TPP /PP allows a business breathing space in difficult times and saves the necessity for court action or formal winding-up processes.

I usually offer anything from 5 weeks to 52-week payment plans, depending on the debt amount and how much difficulty the debtor is in. Negotiate this with your customer. Try and get the best deal for both of you and don’t forget to add on a late payment fee.

Dont Forget the Late Payment Fee

Add a Late Payment Fee to cover the admin fees for doing this, if you haven’t already done so. The amount of the Late Payment Fee you can add to the debt is governed in law. They are £40, £70 or £100 depending on the debt amount.

Set the plan formerly

List each date the payment is due: For example 10th of the month, and next to it put the amount. If a customer owes a £1000 I would add the Late Payment Fee amount of £70 total owed £1070.

Also let your customer know that a default from the arrangement will lead to court action.

If the HMRC offer time to pay arrangements, so can you! Click Here to view more information.


Once court action is initiated it is a bit of a waiting game (aprox. 23 days) taking weekends into consideration.

If your customer (debtor)/(defendant) has not responded to the county court claim then you can request judgment against the defendant.

Once you have the judgment the next step is to request a warrant using the county court bailiff. Or here at Franklin James Credit Management we can transfer the claim to the High Court if the amount is over £600 and use the High Court Bailiffs. They have more powers than the County Court Bailiffs.

The stages of debt collection above, including an alternative to Court or Statutory Demand action are the necessary stages when trying to obtain payment from a customer that has gone past the point of collecting to your normal agreed payment terms.

How to get payment from a company in administration

Other reasons why your customer has not paid, which often only come to light once the payment is overdue initially, include:

  • Is the wrong name and/or address on invoice?
  • Were the wrong or faulty goods/service sent to customer and the query was not resolved?
  • Perhaps the wrong price invoiced?
  • Customer debit notes – your customer raises a debit note against your invoice and pays the difference.
  • Has the customer has paid? But you haven’t allocated the cash to their account.
  • Returned goods and a credit note not raised.
  • Do you have the purchase ledger details Inc. telephone number, email address Head Office? Maybe you are not communicating with the correct department or person responsible for payments.
  • Incorrect or no purchase order number, so the payment was not authorised.
  • Payment terms not agreed. Even though you may have your terms stated on your invoice, your customer may have different terms.

Debt Collection Policy

At Franklin James Credit Management we advise all of our clients to have a debt collection process in place. This allows for easy reference by you and the people responsible for dealing with payments from your customers.

  • Draft Payment Plan and Notice Before Proceedings template letters for consistency.
  • Decide at what point in your debt collection process to send the NBP Letter.

If you would like help or advice implementing a debt collection process then contact us today.

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