How do I manage my bad debts?
18th September 2013
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Rishi Shori, Senior Solicitor in Johnson Law’s Commercial Litigation Department has the following tips for your business in trying to manage customers/clients that do not pay their invoices.

Prevention is better than cure

Cash flow is crucial to any business so keeping control of your bad debts is vital.

Set out below are some top tips to ensure your business stays in control.

  • Keep payment terms as short as reasonably possible. Every business is different and of course maintaining good relationships with clients is important, but shorter payment terms can aid cash flow and help you identify poor paying clients earlier.


  • Make sure your terms & conditions are robust and up-to-date. From 1 April 2013 the limit for bringing a ‘small’ claim increased from £5,000 to £10,000. This means that a successful party bringing a claim of up to £10,000 will not be automatically entitled to recover their legal costs.  This will be the case unless your Terms & Conditions expressly state that the legal costs incurred in pursuing any debt are recoverable. Do your Terms and Conditions protect you?  Why not have them reviewed for free by one of our specialist Commercial Litigation Solicitors to ensure that if matters do need to go to Court you are best placed to succeed.


  • Ensure your credit control process is as proactive as possible.  As soon as payment of an invoice becomes due, telephone the debtor to ask when payment will be made. If payment is not forthcoming this may be due to a perceived issue with the quality of service/product that you have provided.  If this is the case it is beneficial to find this out as early as possible to try and resolve any dispute. Of course sometimes payment is not made simply because the debtor wants to protect its own cash flow for as long as possible.


  • Be robust in enforcing non-payment when chasing up has not worked. Non-payment of debts can jeopardise the future of your business. If you have been reasonable in trying to negotiate payment and this has not worked then you have to take action.

If you would like any further information or an informal chat about debt recovery please  get in touch with one of our specialist team on 0800 130 0699.

Johnson Law is a niche practice specialising in Civil and Commercial Litigation, with Offices in Bolton and Wigan. If you’ve had an accident which wasn’t your fault or are involved in some form of business dispute why not give us a call for some impartial and expert advice.

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