Debt Recovery Guide in Kenya: What Businesses Should Check Before Writing Off Unpaid Invoices

Unpaid invoices can slowly weaken a business.

A client promises to pay next week. A supplier keeps delaying. A tenant avoids calls. A customer disputes an invoice after receiving goods. A company keeps asking for more time, but never commits to payment. By the time the creditor decides to act, months may already have passed.

This is where many businesses make the mistake.

They keep following up informally without preserving evidence, confirming the debt, checking limitation, or preparing the matter for recovery.

A debt recovery checklist helps a business move from frustration to process.

Before taking action, the business should confirm exactly what is owed.

Many recovery problems begin because the creditor does not have a clear statement of account. The debtor may then dispute the amount, allege overcharging, claim partial payment, or argue that the goods or services were not properly supplied.

The first step is to identify the debt with precision.

• ✓Confirm the amount owed.
• ✓Confirm when the debt became due.
• ✓Confirm what goods, services, rent, loan, fees or obligation gave rise to the debt.
• ✓Confirm whether the debtor has made any part-payment.
• ✓Confirm whether interest is chargeable.
• ✓Confirm whether penalties or late payment charges are provided for in writing.
• ✓Confirm whether the debtor has disputed the debt.
• ✓Confirm whether the debt is supported by documents.
• ✓Prepare an updated statement of account.
• ✓Separate principal, interest, penalties and costs.

Before issuing a demand, confirm who legally owes the money.

This is especially important where the business dealt with a company, director, agent, employee, branch, school, partnership, Sacco, church, landlord, tenant or informal business.

Sometimes the person who negotiated the deal is not the legal debtor. Sometimes the invoice was issued to the wrong entity. Sometimes goods were delivered to one company, but payment was promised by another.

• ✓Confirm the full legal name of the debtor.
• ✓Confirm whether the debtor is an individual, company, partnership, business name or organisation.
• ✓Confirm the debtor’s postal address, email address and physical address.
• ✓Confirm the debtor’s directors or officers where dealing with a company.
• ✓Confirm whether the person who placed the order had authority.
• ✓Confirm whether there is a guarantor.
• ✓Confirm whether any director gave a personal guarantee.
• ✓Confirm whether the debtor has changed name, address or business structure.
• ✓Confirm whether the debtor is still active and operating.
• ✓Avoid suing the wrong party.

A demand letter is stronger when the creditor already has the documents ready.

The debtor should not be given an easy opportunity to deny the debt simply because the creditor’s records are weak.

Evidence may include contracts, invoices, delivery notes, emails, purchase orders, receipts, WhatsApp messages, signed acknowledgements, statements of account, bank records and prior promises to pay.

• ✓Written contract or agreement.
• ✓Purchase order.
• ✓Invoice.
• ✓Delivery note.
• ✓Goods received note.
• ✓Email instructions.
• ✓WhatsApp or SMS confirmations.
• ✓Statements of account.
• ✓Receipts for part-payments.
• ✓Bank or M-Pesa records.
• ✓Signed acknowledgement of debt.
• ✓Payment plan.
• ✓Cheque records where applicable.
• ✓Correspondence admitting the debt.
• ✓Proof of demand already made.

Time matters in debt recovery.

A business should not assume that an old debt can always be recovered in court. If too much time has passed, the debtor may raise limitation as a defence.

This is why creditors should not let unpaid invoices sit for years without structured action.

• ✓Confirm when the debt became due.
• ✓Confirm the date of the invoice.
• ✓Confirm the date goods or services were delivered.
• ✓Confirm the date payment was expected.
• ✓Confirm the last date of part-payment.
• ✓Confirm the last written admission of debt.
• ✓Confirm whether the debt is based on contract, judgment, rent, loan or another obligation.
• ✓Check whether limitation may be an issue before filing.
• ✓Avoid waiting until the claim becomes stale.

The contract or agreement may determine how recovery should proceed.

It may provide for credit period, interest, penalties, dispute resolution, jurisdiction, notices, payment milestones, retention, termination, arbitration, or recovery costs.

Where there is no formal contract, the creditor should check invoices, purchase orders, delivery documents and correspondence to establish the terms of the transaction.

• ✓Confirm the payment terms.
• ✓Confirm the credit period.
• ✓Confirm whether interest is allowed.
• ✓Confirm whether recovery costs can be claimed.
• ✓Confirm whether there is a dispute resolution clause.
• ✓Confirm whether arbitration or mediation is required first.
• ✓Confirm whether notices must be served in a specific way.
• ✓Confirm whether there was a retention amount.
• ✓Confirm whether the debtor can raise set-off.
• ✓Confirm whether the contract was properly signed.

Not every debt should be handled in the same way.

A small unpaid invoice may require a different recovery route from a large commercial debt. A disputed debt is different from an admitted debt. A debt owed by a company is different from a personal debt. A debt secured by collateral is different from an unsecured debt.

• ✓Is the debt admitted or disputed?
• ✓Is the debt secured or unsecured?
• ✓Is the debtor an individual or a company?
• ✓Is the amount below or above KES 1 million?
• ✓Is there a written contract?
• ✓Is there an acknowledgement of debt?
• ✓Is there a payment plan?
• ✓Is there a guarantor?
• ✓Is the debtor still operating?
• ✓Is the debtor likely to pay voluntarily?
• ✓Is urgent action needed to preserve assets?

A demand letter should not be a vague threat.

It should set out the creditor’s claim clearly, give the debtor a final opportunity to pay, and prepare the matter for the next legal step if payment is not made.

A good demand letter should be firm, factual and specific.

• ✓Identify the creditor.
• ✓Identify the debtor.
• ✓State the amount owed.
• ✓State how the debt arose.
• ✓Attach or refer to key invoices or documents.
• ✓State any part-payments received.
• ✓State the outstanding balance.
• ✓Give a clear payment deadline.
• ✓Provide payment details.
• ✓Warn of legal action if payment is not made.
• ✓Avoid abusive or defamatory language.
• ✓Keep proof of service.

Not every debt requires immediate court action.

Where the debtor is willing to pay but needs time, a structured settlement may save time and costs. However, informal promises are often weak.

If the debtor requests time, the creditor should consider documenting the arrangement properly.

• ✓Confirm the total outstanding amount.
• ✓Record the debtor’s admission of debt.
• ✓Agree on payment dates.
• ✓Agree on instalment amounts.
• ✓State consequences of default.
• ✓Confirm whether interest continues to accrue.
• ✓Obtain signatures where possible.
• ✓Include guarantors where appropriate.
• ✓Avoid relying only on verbal promises.
• ✓Monitor compliance strictly.

A business should know when ordinary follow-up has failed.

Some debtors delay until the creditor gives up. Others keep making small promises to buy time. Some hide assets or shift business to another entity.

Escalation may be necessary where the debtor has stopped responding, keeps breaking promises, disputes the debt without basis, or appears to be disposing of assets.

• ✓The payment deadline has passed.
• ✓The debtor has ignored the demand.
• ✓The debtor has broken a payment plan.
• ✓The debtor is avoiding communication.
• ✓The debtor is disputing the debt without evidence.
• ✓The debtor is moving assets.
• ✓The debt is approaching limitation.
• ✓The amount justifies legal action.
• ✓The creditor has sufficient evidence.
• ✓The correct recovery forum has been identified.

The correct forum depends on the amount, type of claim, parties involved and nature of the dispute.

Some claims may be suitable for the Small Claims Court. Others may need to be filed in the ordinary civil courts. Some may involve commercial litigation, insolvency steps, arbitration or enforcement of security.

• ✓Confirm the amount being claimed.
• ✓Confirm whether the claim falls within Small Claims Court jurisdiction.
• ✓Confirm whether the claim should be filed in the Magistrates’ Court or High Court.
• ✓Confirm whether the contract has an arbitration clause.
• ✓Confirm whether the debtor is an individual or company.
• ✓Confirm whether the debt is admitted or disputed.
• ✓Confirm whether insolvency action is appropriate.
• ✓Confirm whether security can be enforced.
• ✓Confirm the correct place of filing.
• ✓Confirm the expected costs and timeline.

For qualifying claims within the monetary limit, the Small Claims Court may provide a faster route for straightforward debts.

This may be useful for unpaid invoices, supply of goods and services, money held and received, and other simple commercial claims that fall within its jurisdiction.

• ✓Confirm the debt is within the monetary limit.
• ✓Confirm the claim is suitable for the Small Claims Court.
• ✓Prepare the statement of claim.
• ✓Attach invoices, contracts and delivery documents.
• ✓Identify the correct respondent.
• ✓Confirm where the claim should be filed.
• ✓Prepare witness documents.
• ✓Attend hearing or mention as required.
• ✓Obtain judgment where successful.
• ✓Move to enforcement if payment is not made.

Where a company or individual is unable to pay a debt, insolvency processes may sometimes be considered.

However, insolvency should not be treated as an ordinary debt collection shortcut where the debt is genuinely disputed. If the debt is contested on serious grounds, insolvency action may become risky.

• ✓Confirm the debt is due and payable.
• ✓Confirm the debt is not genuinely disputed.
• ✓Confirm the debtor has been properly demanded to pay.
• ✓Confirm whether a statutory demand is appropriate.
• ✓Confirm the debtor’s legal status.
• ✓Confirm whether insolvency is commercially sensible.
• ✓Confirm whether ordinary civil recovery is better.
• ✓Avoid using insolvency merely to embarrass or pressure a debtor.

If the debtor fails to pay after demand and negotiation fails, court action may be necessary.

A suit should be prepared with proper pleadings, documents and evidence. The creditor should be ready to prove the debt.

• ✓Confirm the cause of action.
• ✓Confirm the correct plaintiff.
• ✓Confirm the correct defendant.
• ✓Prepare pleadings.
• ✓Attach or list key documents.
• ✓Prepare witness statements where required.
• ✓Prepare statement of account.
• ✓Confirm interest and costs claimed.
• ✓File in the correct court.
• ✓Serve the debtor properly.
• ✓Track deadlines after service.

Some debtors raise genuine disputes. Others create disputes to avoid payment.

The creditor should examine the dispute carefully. The response will depend on whether the debtor’s defence is factual, legal, contractual or merely an excuse.

• ✓What exactly is the debtor disputing?
• ✓Is the debtor disputing the entire debt or only part of it?
• ✓Is the debtor claiming defective goods or poor services?
• ✓Is the debtor claiming overbilling?
• ✓Is the debtor claiming set-off?
• ✓Is the debtor relying on a contract term?
• ✓Is there evidence supporting the dispute?
• ✓Can the undisputed amount be recovered separately?
• ✓Can the matter be settled?
• ✓Is litigation necessary?

Winning the case is not the end of debt recovery.

The creditor must still recover the money. If the debtor does not pay after judgment, enforcement steps may be necessary.

Enforcement may include attachment of property, garnishee proceedings, examination of the debtor, or other lawful execution processes depending on the case.

• ✓Confirm judgment has been entered.
• ✓Extract the decree or order.
• ✓Demand payment after judgment.
• ✓Identify the debtor’s assets.
• ✓Identify bank accounts where possible.
• ✓Consider attachment of movable property.
• ✓Consider garnishee proceedings where appropriate.
• ✓Consider examination of the debtor.
• ✓Use licensed auctioneers where required.
• ✓Track payments and balances.
• ✓Keep proof of enforcement steps.

Many businesses lose recovery opportunities because they delay or act informally for too long.

The creditor should avoid habits that weaken the claim.

• ✓Waiting too long before acting.
• ✓Failing to keep signed documents.
• ✓Issuing invoices to the wrong party.
• ✓Delivering goods without delivery notes.
• ✓Allowing credit without written terms.
• ✓Accepting endless verbal promises.
• ✓Failing to document part-payments.
• ✓Failing to send a proper demand letter.
• ✓Suing the wrong debtor.
• ✓Ignoring limitation periods.
• ✓Filing in the wrong forum.
• ✓Using threats instead of process.
• ✓Failing to enforce judgment quickly.

Every business should maintain a complete file for unpaid accounts.

This file should allow an advocate, accountant or debt recovery team to understand the debt quickly.

• ✓Contract or engagement letter.
• ✓Purchase order.
• ✓Invoice.
• ✓Delivery note.
• ✓Statement of account.
• ✓Payment records.
• ✓Correspondence with the debtor.
• ✓Demand letters.
• ✓Acknowledgement of debt.
• ✓Payment plan.
• ✓Debtor identification details.
• ✓Company search where applicable.
• ✓Evidence of part-payments.
• ✓Notes on calls or meetings.
• ✓Litigation or enforcement documents where applicable.

A creditor should seek legal advice early where the debt is large, disputed, old, secured, cross-border, owed by a company in financial distress, or supported by weak documents.

Legal guidance is also important where the debtor is threatening counterclaims, insolvency issues arise, or urgent preservation is required.

• ✓The debt is substantial.
• ✓The debtor has ignored a demand.
• ✓The debtor has broken a payment plan.
• ✓The debtor is disputing the debt.
• ✓The debtor may be disposing of assets.
• ✓The debt is old.
• ✓The debtor is a company in financial distress.
• ✓The contract has an arbitration clause.
• ✓The debt involves security or collateral.
• ✓A guarantor is involved.
• ✓The debtor is outside Kenya.
• ✓Judgment has been obtained but payment has not been made.

Before writing off an unpaid invoice, the business should ask:

• ✓Is the debt clear?
• ✓Is the debtor correctly identified?
• ✓Do we have documents proving the debt?
• ✓Has the debtor admitted the debt?
• ✓Is the claim still within time?
• ✓Has a proper demand been issued?
• ✓Is negotiation still useful?
• ✓Is the matter suitable for Small Claims Court?
• ✓Is ordinary civil action required?
• ✓Is insolvency action appropriate?
• ✓If judgment is obtained, can it be enforced?

Debt recovery should not be driven by anger, pressure or endless follow-up calls.

It should be handled as a structured legal and commercial process.

A business that documents the transaction, confirms the debtor, acts within time, sends a proper demand and chooses the correct recovery route has a better chance of recovering what is owed.

This practical guide explains the essential legal steps and documents to prepare. It is general information and should not replace advice on your particular circumstances.

• ✓Confirm the identity and legal capacity of every party
• ✓Obtain and independently verify the relevant documents
• ✓Conduct the necessary registry and court searches
• ✓Ask an advocate to review the transaction before payment

1. 1Gather the core documents
2. 2Complete independent due diligence
3. 3Review the agreement and obligations
4. 4Complete registration and retain the final records

Contact an advocate immediately if ownership, authority, boundaries, beneficiaries, payment instructions or completion documents are unclear.