When to escalate: from final demand to court
Most overdue invoices are paid after a call and an email. For the few that aren't, there is a clear path from a letter before action to a claim, and in the right cases a statutory demand. Here is how it works, and where the financier comes in.
On Business Training · 20 October 2026 · 5 min read
Escalation is not a punishment for a debtor who is late. It is a decision, made when the ordinary chasing sequence has run its course and the debt is at real risk. Escalate too early and you damage a customer relationship your client depends on. Escalate too late and the debtor has paid everyone else first, or stopped trading.
This article covers England and Wales. Scotland and Northern Ireland have their own procedures.
First, whose decision is it?
On a funded ledger, the credit controller rarely decides alone. On a factoring facility the financier owns the debts and runs the collection. On a confidential invoice discounting facility the client usually collects as the financier’s agent, and the facility agreement normally requires the financier’s consent before legal action, or sets out how it is to be taken.
Before escalating, check the facility agreement and agree the step with the client manager. A letter threatening court action that the financier hasn’t approved can cause more problems than the debt.
Before you escalate: is the debt really undisputed?
Legal steps are for debts that are owed and not genuinely disputed. If the debtor has raised a query about quality, quantity, pricing or delivery, resolve it, or at least separate the disputed part from the rest. A claim for a disputed debt is slow and expensive, and some steps, such as a statutory demand, are simply the wrong tool.
Step 1: the final demand
When a promise has been broken and calls have stopped working, send a final demand. Set out the invoices, the amount and a short deadline, and say what will happen next if payment isn’t made. Make sure the next step is one your client and the financier are prepared to take.
Step 2: the letter before action
Before issuing a claim, the courts expect the creditor to have written to the debtor setting out the claim and giving it a fair chance to respond.
- Debtors that are businesses should be given a reasonable time to reply. Fourteen days is commonly used.
- Debtors that are individuals, including sole traders, are covered by the Pre-Action Protocol for Debt Claims. The letter of claim has to include specific information and documents, including an information sheet and reply form, and the debtor has 30 days to respond.
Getting this step wrong can cost the creditor its legal costs later, even if it wins.
Interest and compensation
Between businesses, the Late Payment of Commercial Debts (Interest) Act 1998 lets the supplier claim statutory interest, at 8% above the Bank of England base rate, unless the contract sets its own interest terms. It also allows a fixed sum for the cost of recovery: £40 on debts under £1,000, £70 on debts from £1,000 to £9,999.99, and £100 on debts of £10,000 or more. Mentioning these in the letter before action often gets attention.
Step 3: issuing a claim
If the debtor still doesn’t pay, the claim can be issued in the County Court. Many money claims are issued online through Money Claim Online. Claims of up to £10,000 are usually dealt with on the small claims track, which is designed to be used without lawyers.
If the debtor doesn’t respond to the claim, the creditor can ask for judgment in default. A County Court Judgment can then be enforced, for example through enforcement agents, an attachment of earnings order or a charging order, depending on who the debtor is and what it owns.
The statutory demand
A statutory demand is a formal demand under insolvency law. For a company, it can be served for an undisputed debt of more than £750; if the company neither pays nor reaches agreement within 21 days, the creditor can petition to wind it up.
It is a powerful step, and it is often used badly. It should only be used for debts that are clearly owed and not disputed. Using it to pressure a debtor over a disputed invoice risks the petition being dismissed and the creditor paying the debtor’s costs. It also starts a process that may end with the debtor in liquidation and every creditor sharing what is left.
Collection agencies and solicitors
Many debts are passed to a collection agency or a solicitor before or instead of court action. That decision, the fees, and who the debt is placed in the name of, are for the client and the financier to agree.
Keep the record
Every escalation step depends on the account history: invoices, delivery evidence, the chasing record, promises made and broken. A credit controller who has kept clear notes makes each of these steps faster and stronger.
Escalation works best when everyone knows the path in advance, the debts are clean, and the decision is made deliberately rather than in frustration.