Business debt collection is inevitable for many entrepreneurs. You have delivered work or sold goods, but payment remains outstanding. Unpaid invoices directly affect your liquidity and cost unnecessary time and energy. Yet many entrepreneurs wait too long before taking action.
In this article, we explain step by step how business debt collection works, what options you have and when legal action is worthwhile.
When is business debt collection applicable?
Business debt collection applies when:
- you do business with another company;
- you have delivered correctly;
- the invoice is due;
- payment remains outstanding without a valid reason.
This can involve a single unpaid invoice, but also structural non-payment.
Why entrepreneurs wait too long with debt collection
Many entrepreneurs postpone debt collection because they:
- do not want to damage the relationship;
- think payment will come on its own;
- do not feel like dealing with legal hassle;
- are afraid of costs.
In practice, we see that acting quickly and professionally actually increases the chance of payment.
Step 1: Check your legal position
Before starting business debt collection, it is important to check your position.
Answer the following questions, among others:
- is there an agreement or assignment?
- was the work performed correctly?
- is the invoice correct and due?
- do general terms and conditions apply?
If this basis is correct, you generally have a strong position.
Step 2: Send a clear payment reminder
The first step in a debt collection process is often a written payment reminder.
In this you state:
- the outstanding amount;
- the invoice date;
- a specific payment deadline;
- the consequences if payment is not received.
Remain businesslike and factual.
Step 3: Notice of default
If payment remains outstanding, a notice of default usually follows. This is a formal letter in which you give the debtor a final opportunity to pay.
A proper notice of default:
- is in writing;
- refers to the agreement;
- sets a clear deadline;
- announces follow-up steps.
This stage often already leads to payment.
Step 4: Legal debt collection
If payment still remains outstanding, legal debt collection can be initiated.
This means that a lawyer formally addresses the debtor. Experience shows that this often generates sufficient pressure to enforce payment, without the need for court proceedings.
Step 5: Court proceedings
If legal debt collection also does not lead to payment, court proceedings can follow.
In such proceedings, the following can be claimed:
- payment of the principal amount;
- statutory interest;
- collection costs;
- legal costs.
Many cases are still settled before a hearing.
What if the client disputes the invoice?
A commonly used defence in debt collection is that the invoice is disputed.
As explained in our article invoice disputed, this does not automatically mean that payment may be refused.
Business debt collection with international clients
With foreign debtors, business debt collection is more complex. Different legal systems and language barriers play a role.
Read more about our approach to international debt collection in the Netherlands.
Common mistakes in business debt collection
- waiting too long to take action;
- not sending a notice of default;
- communicating emotionally;
- not collecting evidence;
- giving up on legal steps too quickly.
What can Arslan Advocaten do for you?
Arslan Advocaten supports entrepreneurs with business debt collection. We assess your case, determine the right strategy and guide the entire debt collection process.
Also read more about our work in business law and regarding not paid for delivered work.
Costs and litigation funding for business debt collection
In business debt collection cases, we do not work on a no cure no pay basis in principle. A careful legal approach is essential.
However, this does not mean that you have to bear these costs yourself. In many debt collection cases, litigation funding is available.
We work together with an independent litigation funder who – after a substantive assessment – can decide to:
- pay all lawyer fees;
- cover the court fees;
- bear any expert costs.
If litigation funding is granted, you as a client pay nothing on balance. The litigation funder bears the full financial risk.
The litigation funder only receives compensation upon success. For you, this means that you can collect your money without financial risk.
About the author
This article was written by Onur Arslan, lawyer and founder of Arslan Advocaten. He assists entrepreneurs in debt collection and payment disputes.
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