What to do when a wholesale customer will not pay
Most late invoices are paid by the fifth reminder. This guide is about the ones that are not: how to escalate without wasting money, and when to stop.
In short
- Separate the three cases: cannot pay, will not pay, and disputes the invoice. Each needs a different approach.
- Stop supply first, then agree a plan if there is one to agree, then escalate in writing with dates.
- Formal routes, from a letter before action to a court claim or a collection agency, are cheap for small debts in the UK and most US states; use them.
- Set a point at which you write the debt off and move on. Chasing a dead debt costs more than it recovers.
First, work out which problem you have
They cannot pay. The business is short of cash. They answer the phone, apologise and promise. The right tool is a payment plan with dates, a hold on new orders and a decision about whether to keep trading at all.
They will not pay. They have the money and are choosing to pay others first, or to see what you will do. The right tool is a firm, dated escalation that makes paying you easier than not.
They dispute it. Short delivery, damaged goods, a price they did not expect. The right tool is a conversation about the order, a credit note where one is due, and payment of the rest. Chasing a dispute as a debt turns a solvable problem into a lost account.
The escalation
Days are from the due date. Earlier steps are in our chasing guide.
- Day 14
Hold
New orders paused. The buyer has been told. Nothing more ships until the balance is paid.
- Day 30
Final notice and call
Written final notice with a date seven days away, and a phone call to the owner. Interest and compensation applied where they apply.
- Day 37
Payment plan or letter before action
If they engaged on the call, a written plan with dates and amounts. If not, a letter before action giving 14 days.
- Day 51
Formal step
A court claim, a collection agency or, for larger company debts in the UK, a statutory demand. Pick one and do it.
- Day 90+
Decide
If nothing has come back, decide whether to pursue or write off, and record the decision.
Payment plans that get paid
A plan is a short written agreement: the total, the instalments, the dates, and that the account stays on hold until the balance is cleared. Keep it short, two to four instalments over two months, because long plans are forgotten plans. Take the first instalment on the phone by card if you can; a plan that starts with a payment is far more likely to finish with one.
Put the dates into your reminder schedule. In Terms Due, pause the normal reminders for the invoice and set a reminder for the day after each instalment. If an instalment is missed, the plan is off and the escalation resumes where it was.
Formal routes
General information for the UK and US; thresholds change, so check the current figures before relying on them, and take advice for anything large.
| Route | Where | Good for | Notes |
|---|---|---|---|
| Letter before action | UK and US | Any debt | A formal letter stating the amount, the basis, a deadline and what happens next. In the UK it is expected before a court claim. |
| Online court claim | England and Wales (Money Claim Online) | Debts up to £100,000; small claims track up to £10,000 | Fee is a percentage of the claim; most claims are undefended and judgment follows. |
| Small claims court | US, by state | Debts up to the state limit, commonly $5,000 to $25,000 | No lawyer needed in most states; filing fees are small. |
| Statutory demand | UK, company debtors | Undisputed company debts of £750 or more | Formal demand that can precede a winding-up petition. Powerful; only for undisputed debts. |
| Collection agency | UK and US | Debts you do not want to chase yourself | Usually paid a percentage of what they recover, often 10 to 25 percent. No win, no fee is common. |
| Selling the debt | UK and US | Writing off while recovering something | A debt buyer pays a small fraction of the face value. A last resort. |
Worked example
Three debts, three decisions
A cafe owes $1,150 and has gone quiet. A letter before action gets a call and a two-instalment plan, paid by card on the phone. Total cost: one letter.
A boutique owes $9,200, disputes a $600 shortfall from one delivery and has not paid any of it. You issue a credit note for the $600 the same day and a final notice for $8,600 with a seven-day date. They pay. The dispute was real; the delay was not.
A distributor owes $14,000 and has stopped answering the phone. Companies House shows a new director and accounts overdue. You send a statutory demand for the undisputed amount, instruct a collection agency when it lapses, and recover $9,800 less fees four months later. The remaining $4,200 is written off and the limit lesson is learned: the account was over its limit by half when it stopped paying.
Recovery that works, and recovery that does not
Does not work
- Continuing to supply while the debt grows, because stopping feels awkward.
- Threatening court and not going.
- A payment plan with no dates and no first payment.
- Chasing a disputed invoice as if it were a late one.
- Spending more on recovery than the debt is worth.
Works
- A hold at 14 days, applied every time, so debts stay small.
- Each step in writing with a date, and taken on that date.
- A short plan that starts with a card payment on the phone.
- The dispute resolved first, then the balance chased.
- A write-off point decided in advance.
Knowing when to stop
A debt is worth chasing while the expected recovery exceeds the cost of chasing it, including your time. For a $600 debt that means one letter and perhaps an online claim. For $14,000 it means an agency or a court. For a debtor that has ceased trading with no assets, it usually means nothing at all; recording the write-off and tightening the limits is the productive step.
Whatever you decide, record it. A write-off with a reason attached is a lesson; a debt that drifts off the report is a lesson you will pay for twice.
Not getting here next time
Almost every debt that reaches formal recovery was once a small late invoice from a buyer who was still allowed to order. The fix is upstream: a limit per buyer, a hold at a fixed point, reminders that start before the due date and collection from saved cards. Terms Due runs all four; see how it works.
Questions
Should I keep supplying a buyer on a payment plan?
Only for cash. Keep the account on hold for terms until the plan is complete; let them buy upfront if they want to keep stock coming.
Can I charge the costs of recovery to the buyer?
In the UK, the fixed compensation under the 1998 Act covers this and reasonable costs above it can be claimed. Elsewhere it depends on your terms and local law.
Is a collection agency worth it for small debts?
For debts under a few hundred, a letter before action and an online claim are usually cheaper. Agencies earn their fee on debts large enough to justify their time and on debtors who ignore you but not them.
What if the buyer has gone into insolvency?
Register your claim with the administrator or liquidator and expect a small return, if any. If you have a retention of title clause, ask about recovering unpaid-for goods.
Does chasing hard lose customers?
Chasing consistently rarely does; buyers expect it. Chasing inconsistently, or chasing a dispute as a debt, does. The customers you lose by holding orders at 14 days are usually customers you were about to lose money on.
Related
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Read moreUK late payment interest
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Read moreStop chasing wholesale invoices by hand
Install Terms Due, set a credit limit for each buyer and let the app hold, remind and collect.
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