How Do You Get a Customer to Pay a Disputed Debt?

Summary

• A disputed debt should be handled differently from an ordinary late payment. The first task is to decide whether the customer has raised a real defence or is simply delaying.
• For B2B debts, the Late Payment of Commercial Debts (Interest) Act 1998 may allow statutory interest and fixed compensation. However, the statutory regime can be displaced where the contract provides a substantial remedy for late payment.
• Debt disputes are usually won or lost on documents. The contract, scope, invoice trail, delivery evidence, and complaint history usually matter more than repeated chasing messages.
• Insolvency pressure is risky where the debt is genuinely disputed on substantial grounds. Winding-up and similar procedures are not intended to decide ordinary contractual disputes.
• SME owners usually improve recovery prospects by acting early, properly gathering the file, and choosing a procedure that matches the real dispute.

You can recover a disputed B2B debt, but the right route depends on the nature of the dispute. If the defence has real substance, the case may need to be narrowed, negotiated, or litigated properly. If it does not, firm pre-action work often produces payment faster than open-ended chasing.

The main mistake is treating a disputed invoice as a routine credit-control issue. Once the customer says the goods were defective, the work fell outside the scope, the price was wrong, or there is a cross-claim, the issue becomes both a legal dispute and a debt issue.

Identify The Real Dispute

Before sending a formal demand, pin down exactly what the customer says is wrong. Common themes include defective goods or services, delay, unauthorised variations, price disputes, lack of authority, or set-off based on an alleged counterclaim.

Timing matters too. If the complaint was raised only after payment was chased, that may say something about its strength. If the issue was raised at the time and left unresolved, that will shape the legal and commercial assessment.

Check The Contract

In B2B debt recovery, the contract often decides more than the invoice itself. Payment dates, acceptance provisions, notice clauses, restrictions on set-off, dispute resolution clauses, and interest terms all matter. The Late Payment of Commercial Debts (Interest) Act 1998 creates rights to statutory interest and compensation on qualifying debts. Those rights are affected by later amendments, including the 2013 regulations that strengthened the supplier’s position in commercial transactions.

The Late Payment of Commercial Debts Regulations 2013 added a right to claim reasonable recovery costs where the fixed statutory compensation does not cover them.

A signed contract is helpful, but its absence is not fatal. Quotations, purchase orders, emails, delivery notes, and the parties’ course of dealing can still prove the agreement and show whose terms govern the deal.

The Importance of Documents

In my experience, the more documented evidence a client can provide, the greater the chance of a successful result. Rather than ad hoc chasing for payment, put one person in charge, build a chronology, and gather every relevant document into one file, including:

• The contract, terms and conditions, quotation, and purchase order.
• Emails or messages agreeing on the scope, price, delivery dates, or changes to the deal.
• Delivery notes, signed timesheets, completion records, or proof of acceptance.
• Invoices, statements, and any part-payments already made.
• Complaint records and any remedial work or replacement supplied after the complaint.

Interest And Compensation

If the debt qualifies under the 1998 Act, statutory interest may be added and fixed compensation may also be available. The familiar headline rate is simple interest at 8% above the Bank of England base rate.

Although this can sharpen a claim, it does not answer the underlying issue of liability. If the customer has a real defence to the invoice, statutory interest does not turn a weak claim into a strong one.

When The Dispute Is Genuine

A genuine dispute should be handled with care. If the customer has raised a coherent complaint supported by documents, the sensible course may be to narrow the issues, request the missing material, and test whether part-payment can be secured while the balance is resolved.

That approach can be especially sensible where the business relationship still matters. A hard letter can still have a place, but a focused, without prejudice discussion may recover money faster if only part of the invoice is truly disputed.

When The Dispute Is Tactical

Some customers say very little until the reminders become hard to ignore. Then a complaint appears, but no proper detail follows. In that situation, a well-drafted letter before action can be effective.

The letter should identify the contract, the invoices, the amount due, any interest and compensation claimed, the defences raised so far, and why they are rejected. It should also set a clear deadline for payment or for a full written response.

Considering Court Action

If the debtor still does not pay, the next step may be to bring court proceedings. For many SME disputes, that means proceedings in the County Court or High Court, depending on value and complexity. The right forum depends on the amount in issue, the factual disputes, and any specialist feature of the contract.

Court is not always the only answer. Construction disputes can be resolved quickly and cost-effectively by adjudication. If you have an Arbitration Agreement, you will need to follow the process outlined in it to begin arbitration proceedings.

Insolvency Pressure

Creditors are often tempted to serve a statutory demand or threaten a winding-up petition. Those tools can be powerful where the debt is plainly due, but they are risky if the debt is genuinely disputed on substantial grounds.

That warning reflects a settled insolvency principle in England and Wales, namely, insolvency procedures are not there to determine ordinary contractual disputes. If the defence is real and substantial, the creditor is usually expected to sue in the ordinary way rather than try to force payment through insolvency pressure.

Common Questions From Our Clients

Can I charge interest on a disputed business invoice?

Yes, if the debt is a qualifying commercial debt and the statutory regime has not been displaced by a substantial contractual remedy, interest and compensation may be recoverable under the 1998 Act.

Should I send a statutory demand if the invoice is disputed?

No, not if the debt is genuinely disputed on substantial grounds, because insolvency procedures are not the right forum for resolving an ordinary contractual dispute.

What if there is no signed contract?

A claim may still succeed if the agreement can be shown through quotations, purchase orders, emails, delivery records, and the parties’ course of dealing.

Is part-payment a bad idea?

No, part-payment can be a sensible outcome where some liability is accepted, and the balance remains genuinely disputed.

When should I stop chasing and start legal action?

Legal action should be considered once the dispute has been identified, the evidence is in order, and the debtor has failed to respond to a clear pre-action demand.

If your business is dealing with a customer who is refusing to pay and hiding behind a weak or shifting dispute, early legal action can quickly change the position. Gulbenkian Andonian Solicitors can review the contract, try to resolve the dispute, and move to the recovery strategy most likely to achieve payment/