One of the problems facing modern business is maintaining cash flow. Nearly all business will have costs, such as salaries, rent and business taxes that must be paid regardless of how much they receive in income. Whilst the vast majority of invoices are likely to be paid without dispute, difficulties arise when there is a dispute, or the debtor simply refuses to pay. In these circumstances, the way in which the commercial relationship was formed, and the finer details of the agreement between the parties, can be pivotal to the amount that be recovered.

One of the ways that a party can maximise payment is by having clear, unequivocal payment terms. This is not just the amount due, but also what the payment terms are and what happens if payment is not made. These can be crucial in a dispute over payment as of the matter goes to Court, one of the first things the Court will consider is the payment terms, and in these circumstances, the clearer the terms the better. Ambiguous payment terms are more are open to interpretation than clearly defined payment terms which make it easier for a Court to work out whether the payment to which the action relates was overdue.

Once an agreement has been reached, it is essential it is recorded in writing. An agreement does not have to be written to be legally binding but having it in writing can make it easier to prove the debt. A written Agreement does not just have to be on paper but can also include more modern methods such as text, WhatsApp and even social media postings. As long as there is evidence of offer, acceptance, and an intention to create legal relations, and the terms are reasonable, the definition of what has found to be a contract has been quite wide ranging. There are therefore very few commercial situations where it is unlikely to be possible to have some sort of contract. Another advantage of a written agreement is that it can be clear when it has been varied, and therefore the terms of the contract changed.

Another way of maximising debt recovery is the pre-action process. This is often overlooked but can avoid expensive legal costs which cannot always be recovered. In many cases, a formal request for payment, can lead to payment avoiding the need for court proceedings. It also gives the creditor to investigate whether the debtor can pay. Any debt carries the risk that the debtor may wind up its business or go bankrupt to avoid payment and if it this becomes clear in the pre-action phase; the creditor can then make a decision as to whether it is commercially viable to proceed with the recovery process. Pre-action can also identify potential assets for enforcement if judgment is obtained, as well as the current location and identity of the debtor.

Although the practical steps described above are likely to make it easier to define a potential dispute over an unpaid invoice and will assist the parties in resolving a dispute, it is important to remember that every contract is different, and each case will be determined on its individual merits.

Get in Touch

If you need advice on your debt recovery procedures, or have invoices that have not been paid, we offer an initial 1 hour fixed fee for £95 including VAT! For more information please contact our Dispute Resolution Solicitor, Chris Miller on 01189589711 or e-mail

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