Letter before action

A letter before action is the last step before court and, more often, the step that makes court unnecessary. It sets out what is owed, why, and what happens if it is not paid. For a business that has been chasing an invoice politely for months, it is usually the first communication the debtor's finance director actually reads.

This one is for business debtors only

That distinction is not a nicety. Where the debtor is an individual or a sole trader, the Pre-Action Protocol for Debt Claims applies: you must allow 30 days for a reply and enclose a prescribed information sheet, a reply form and a statement of account. Sending this letter to a sole trader does not comply, and a court can penalise you for it. Use a different letter for that case.

For a company, a limited liability partnership or a partnership owing money in the course of its business, this letter follows paragraph 6 of the Practice Direction on Pre-Action Conduct and Protocols. That requires a fair opportunity to respond, and the template allows at least 14 days.

Why the deadline matters more than the tone

A court can penalise a claimant in costs for issuing proceedings without giving the other side a proper chance to respond, even where the claim itself succeeds. Fourteen days is the usual minimum for a business debt. Chasing again in seven days and then issuing is the kind of sequence that costs money at the end of an otherwise good case.

Interest, and asking for it properly

The template offers two options. Contractual interest, where your terms provide for it, at the rate your terms specify. Or statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998, which applies between businesses where the contract is silent, together with the fixed compensation sum that Act allows for each debt. Claiming the right one, with the calculation shown, is more persuasive than a round number.

Complete the statement of account

Set out each invoice, its date, the amount and what remains unpaid, and enclose copies of the invoices and your terms. A debtor who disputes the debt has to say why, and a clear schedule makes a vague dispute harder to sustain.

What comes after

A claim of up to £100,000 against a defendant in England and Wales can usually be issued through Money Claim Online. A claim of £10,000 or less is normally allocated to the small claims track, where legal costs are not generally recoverable even when you win, which is worth weighing before instructing anyone. A statutory demand is a different instrument and should not be used to pressure a genuinely disputed debt.

Our debt recovery solicitors send these under our letterhead, which changes the response rate, and our dispute resolution team handles it from there.