It is important to establish measures and take proactive steps to protect cash flow and preserve customer relationships in your business. By doing this upfront, a business can reduce any financial risk and resolve debt issues efficiently.
Below are a few examples of practices a business can implement to reduce the risk of unpaid accounts:
Pre-Contract and Onboarding Practices
- Clear contracts with clients, establishing terms and conditions of business, with details of payment terms, interest and late fees.
- Carrying out credit checks on clients and assessing the client’s financial background before offering services. For example, a search of the Land Registry or the Individual Insolvency Register can reveal useful information. For a small fee, you can also perform a search of the Trust Register Online to reveal if the debtor has a County Court Judgment registered against their name or are subject to a fine by the court. In addition, a quick social media and internet search can reveal if the individual is currently trading and may have an alternative source of income. In terms of companies, a search of Companies House or the London Gazette can reveal accessible information about a limited company or partnership. The more information we know about a debtor, the higher the chance of successful debt recovery.
- Keep meticulous records of all agreements and communications.
During Service/Invoicing
- Send regular invoices weekly or monthly to keep payments on track and set clear payment terms.
- Ensure that you include bank details and offer multiple payment methods (direct debit, online, etc), for easy payment.
- Call clients when payments are missed or send reminder emails a few days before payment is due, using a professional and empathetic tone.
- In cases where your clients face hardship, you could also consider proposing a manageable payment plan.
When a client still fails or refuses to pay
Should your clients still fail or refuse to pay, there are steps that can be taken as a pre-debt recovery escalation process in house. For example, sending a formal notice clearly stating the amount owed, what it is due for and setting out a deadline for payment. Send this via email and post. Ensure that multiple channels of communication are used before escalating the matter and allow reasonable time for payment before sending further reminders or proceeding with legal proceedings.
Before taking legal action against a debtor, it is important to consider whether payment is likely to be recovered in practice. Pursuing a court Judgment or enforcement measures serves little purpose if the debtor has no assets available. Even where assets are present, enforcement may not be commercially sensible, and it is important to consider whether good money is thrown after bad. Where the debtor does hold assets, obtaining detailed information about them is crucial to selecting the most effective method of enforcement.
Insolvency trends in England and Wales
The Individual Insolvency Statistics provide a brief overview of insolvency trends in England in Wales, as below:
In September 2025, 11,101 individuals entered insolvency in England and Wales. This was 3% lower than in August 2025 and 7% higher than in September 2024. The individual insolvencies consisted of 622 bankruptcies, 3,985 debt relief orders and 6,494 individual voluntary arrangements. Debt relief order numbers in September 2025 were lower than the record high seen in August 2025 but remain at the historically high levels seen over the past 18 months. There were 7,684 breathing spaces registered under the Debt Respite Scheme in September 2025. This is 12% higher than in September 2024.
Corporate insolvencies had a number of registered company insolvencies in England and Wales being 2,238 in May 2025, 8% higher than in April 2025 at 2,074 and 15% higher than the same month in the previous year of 1,946 in May 2024. Company insolvencies in May 2025 consisted of 354 compulsory liquidations, 1,734 creditors’ voluntary liquidations, 136 administrations and 14 company voluntary arrangements.
In light of these figures, it is essential to review each matter carefully before commencing formal legal debt recovery action. Given the prevalence of insolvency, there is a real risk that the costs of litigation and enforcement may exceed any amount ultimately recovered.
This is not to suggest that debt recovery should be avoided altogether, but rather that the likelihood of success should be assessed at an early stage by considering the debtor’s financial position and putting measures in place as set out above to give some security.
In many cases, non-payment may reflect an inability to pay rather than a deliberate refusal and a measured approach can help ensure that any legal action taken is proportionate and commercially justified.
What to do if you are struggling with debtors
If you are struggling with debtors or would like some advice on recovery then please do contact one of the DebtLink team.
This article was co-written by Luke Richards, DebtLink manager, and Ema Greet, paralegal in the DebtLink team.