With any monetary transaction like a loan to a friend, invoice from a business, or a refund from a tradesperson, there will always be a chance that the other party will fail to pay you.

Just getting back what is owed to you can be difficult enough, but if you then also lose touch with the debtor, the complexity of your problems will increase significantly.

When a business owes you money it's generally a straightforward matter to track them down, as when a business is still trading their contact details can be found online or via their advertising. But for debts owed by a person it can be a much more difficult task to trace an individual.

Regardless of having the debtor's mobile number, email address and social media details, the most important information you will need when considering legal action is their address.​

The first stage in taking formal debt recovery legal action is sending a Letter of Claim (also known as a Letter Before Action) to the debtor.

The purpose of this letter is to outline the exact amount that is owed, the reason you believe the debt is due, provide a reasonable timeframe for payment to be made in full, and in the event payment is not received in this timeframe, warn that court proceedings may be started without further notice.

The Letter of Claim should be posted to the debtor at their current address. While a copy can also be sent via email it must be sent in the post and be clearly dated.  Sending this letter is an important 'pre-action' step and is required to comply with the various pre-court action protocols.

Should the letter not result in payment the next stage is issuing court proceedings. Again, this will require the debtor’s current address for the court to successfully serve the Claim Form and for you to start any subsequent enforcement action.

Therefore, finding the current address of the debtor is critical before considering legal proceedings.
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Businesses are generally easier to locate an address for as most businesses want to be found by their potential customers. A trading address will usually be on their website, used in their advertisements or in any agreements or terms and conditions you may have been given.

​Failing this the next places to try to locate an address are on the various business listings that are available online:

• Companies House – All UK based Limited companies will be registered on the gov.uk Companies House website which will provide their registered and correspondence addresses.
• Online Directories – Local businesses may be featured on popular online directories such as Google Maps, Facebook or Yell.com.
• Trade Organisations – If the business advertises that they are a member of a trade association, then their details should be recorded on the relevant trade body website. For example, plumbers and heating engineers may be on the Gas Safe Register.
• Credit Checking – Many credit score companies that provide credit reports on businesses will also supply their current trading address. Obtaining a financial report will also be very helpful in confirming that the business has the assets available to pay your debt.

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​Individuals can be much more difficult to locate an address for as there will be significantly less information about them online or in the public domain.

A first step is to ask any friends or business associates that you may have in common if they know the debtor's current address. Note that while you may know the workplace of the individual, legal correspondence for a debt owed by them personally must be sent to their residential address and not to their employer.

There are then some free and low cost directories available online which may help trace an individual such as the BT Phonebook and 192.com. However, the results provided by these directories may be limited and outdated so it is not recommended that these are solely relied on.

The most reliable method of tracing an individual's address is to instruct a professional tracing agent. These can be found online and will offer various tracing packages depending on the depth and timeframe required for the search. Also, many tracing agents offer a no trace no fee service which can be helpful in the event an individual cannot currently be located.
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Being owed money but having no address for the debtor adds a further level of complication to taking legal action. However, with a little DIY investigation work and perhaps paying a small fee for some professional tracing assistance, most debtors can be found.

​Once you have located the debtor you then need to be confident that they have the assets or funds available to repay the debt. If you were struggling to locate a business because it has closed, or an individual has moved due to their previous home being repossessed, you will need to think carefully about your chances of recovering the debt before incurring the cost of pursuing them through the courts.
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Whether you are a business or an individual, when money is owed to you there's usually a clear deadline specified for when payment is expected to be made. For example, your business invoices will have a payment period detailed on them, and if you've loaned money to a friend then you will have an agreed repayment date or schedule.

But if this date passes and no payment has been forthcoming, can you claim interest on the money owed to you?​
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The ability to charge interest on an overdue invoice or order will depend on the status of your customer and the contractual terms you have agreed that deal with late payment. If you have a contract in place that contains a provision or clause for interest to be charged, then this should be sufficient to add interest to the overdue amount at the agreed rate.

If there is no specific contract in place with your customer that dictates interest charges, you may still be able to claim interest via legislation known as the Late Payment of Commercial Debts (Interest) Act 1998 if your customer is also a business (limited company, sole trader etc.).
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This late payment legislation permits you to charge 8% interest plus the Bank of England base rate on overdue debts owed by your business customers (B2B). You can begin charging interest as soon as payment becomes overdue, and if no payment date was documented or agreed payment is classed as late 30 days from the customer receiving your invoice or delivery of the service/product.

There are some exceptions and additional items that can be claimed as part of this legislation, so please read our full guide on claiming interest on unpaid invoices. Alternatively you may wish to instruct business debt recovery solicitors who will be able to calculate your late payment interest and compensation entitlement on your behalf.
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If the customer whose payment is overdue is an individual and not a business, there is no statutory right to charge interest on the amount. So, unless you have an agreed contract or terms of business in place that specifies additional charges will be made in the event of late payment, no interest is able to be added to the debt until court proceedings are started.

When dealing with debts incurred by consumers (and sole-traders) it is also important to comply with the Pre-Action Protocol for Debt Claims. Failure to do so before commencing court proceedings may result in sanctions being imposed on you, likely in relation to court costs.

If you are owed money as an individual such as through a private sale, shared bills or a personal loan, there is no entitlement to claim interest on the debt unless you have a signed contract or agreement that permits it.

For example, in the case of lending money ideally you will have documented the arrangement in a loan agreement which should have a provision for any interest and what occurs in the event of the borrower defaulting on their repayments.

Without a written contract interest is not able to be added to a personal debt prior to court proceedings being started.
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Regardless of the status of the debtor and the absence of a right to contractual interest, if you get to the stage of issuing a court claim to recover the debt, interest will often be able to be added to the amount owed.

Section 69 of the County Courts Act 1984 permits interest to be added to most non-commercial debts at the rate of 8% per year. This is a statutory interest rate and you can usually claim it from the date the debt was due up to the date you issue the claim.

At the point of issuing court proceedings, other court fees and costs can also be added to the amount that is being claimed. However, note that interest as with any other element of a claim is awarded at the discretion of the court.

The applicable interest is just one of the items that needs to be considered and calculated as part of a court claim for a debt. Therefore, it is always advisable to seek early legal advice if you are contemplating pursuing a substantial debt.
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Non or late paying customers are unfortunately a fact of life for most small to medium businesses. While at best delayed payments can be annoying, at worst they will have a measurable and detrimental impact on the smooth running of your business.

Recent figures via the Official Statutory Register of Judgments has given an insight into the potential scale of the problems around business debts and disputes that have been escalated to the courts. The data shows that in the third quarter of 2018 there was a 32% increase in the number of County Court Judgments (CCJs) issued against businesses.

That's over 10,000 court judgments per month registered against businesses in England and Wales, with an average value of £3,072 each.

While there are fixed fee debt recovery services available to deal with most size B2B debts, needless to say it's more important than ever to make sure you have effective procedures in place for protecting cash flow in your business.

So, we wanted to share some of the proactive general advice that we've provided to our clients after helping them recover business debts owed to them.​

​Make sure you know who you are doing business with. Be aware of the size of the organisation and whether they are a partnership, sole trader, limited company or PLC. Check if they use a trading name and if the person instructing you has the authority to do so on behalf of the business you will be ultimately be invoicing?
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Make use of public services such as Companies House to verify your private limited company customers. When first considering doing business with them, verify their registered office, company number and trading status. Then throughout your relationship recheck periodically and be alert to warning signs such as overdue accounts, charges being registered against them or large drops in cash reserves which may indicate their business is struggling.
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Whenever possible try to request payment in advance or at least a deposit. Invoice as soon as the order is completed or agree to do so at regular intervals if it's a lengthy job.
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Include standard payment terms within your T&Cs and on your invoices, ensuring they are clear and reasonable. Make customers aware of these terms before they order, when you provide a quote and when an invoice is at risk of becoming overdue. Your invoice should also include details on how to pay you, such as your bank account or online payment information.
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For large or regular transactions consider getting a contract drawn up and signed by both parties. At the very least ensure the main points of the order or transaction are in writing with evidence that it has been agreed by each party.
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If you ever end up having to consider legal action, good record keeping will pay dividends. Everything from the original order, proof of delivery and late payment chases should be kept. Your solicitor will want written evidence and a chronology of events to proceed with a claim, so keep copies of any emails and notes of any telephone calls.
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Implementing the above tips may help in reducing the chances and impact of late paying business customers. But even with the most vigilant owner, on-the-ball accounts team and strictest terms and conditions, you will still encounter customers that simply choose not to pay.

So your next step is to consider formal legal action to recover the amount owed, which usually starts with sending a Debt Recovery Letter Before Action.
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Having robust Terms & Conditions, a consistent approach to invoicing, and a clear paper trail will help you get what's owed to you that much quicker and assist your legal claim should you ever need to get a solicitor involved.