A trade debt is not like a loan. Nobody signs a loan agreement, there is no security, and most of these debts arise from trust between trading partners who have dealt with each other for a long time. A building materials shop delivers to a contractor on 30 days' credit. A factory ships to a distributor and sends the invoice later. A service company finishes the job and waits for a cheque. One day 30 days' credit becomes 90 days, and then the customer goes silent.
This guide is written for business owners and accounts teams with unpaid customers. It explains how trade debts differ from ordinary debts, what is urgent, and how to turn an outstanding invoice into money.
This is general information. The limitation period and a creditor's rights depend on the facts of each case, so consult a lawyer before you decide.
The evidence for a trade debt is in documents you already produce every day
Most businesses already hold enough evidence to sue without realising it. The documents are simply scattered. What you need to gather is:
- Purchase orders or messages ordering the goods, including chats in which the customer placed the order
- Delivery notes signed by the recipient. This is the most important document, because it proves delivery
- Invoices, tax invoices and billing statements, together with proof that the customer received them
- Statements of outstanding balance that the customer has acknowledged or has not disputed
- Proof of part payments, and messages in which the customer asked for more time or for instalments
If the delivery note is unsigned, or the person who received the goods is unknown, find other evidence to go with it, such as photographs taken at delivery or a message confirming receipt. The sooner you gather it, the easier it is to find.
Limitation period: two years or five years, depending on what the customer did with the goods
As a rule, a trader claiming the price of goods or of work done for a customer is subject to a limitation period of two years. But if the customer bought the goods for use in the customer's own business, the period is longer, five years. For example, a materials shop sells to a contractor who uses them in construction, or a factory sells raw materials to another factory that uses them in production.
This difference matters a great deal. A debt the owner thinks is already time-barred may still be claimable, and a debt the owner thinks has plenty of time left may be close to expiring.
Another point to know is that the limitation period can start running again. If the customer makes a part payment, asks for instalments, or signs an acknowledgment of the debt, it restarts. A business that is already negotiating with a debtor should ask the debtor to confirm the balance in writing every time.
Check the debtor company's status before anything else
Before sending a demand letter or suing, check three things.
- Legal status. Check the Department of Business Development records to see whether the company is still operating, has been dissolved, is in liquidation, or is a dormant company. If it is in liquidation, you must claim from the liquidator.
- Bankruptcy and rehabilitation cases. If the court has accepted a rehabilitation petition or issued a receivership order, the creditor must file a claim for repayment within the deadline. See the creditor's guide to Thai bankruptcy and rehabilitation for details.
- Recent changes. Have the directors, shareholders or registered address changed recently? A company that changed its directors and moved its address at the same time, during the period the debt was outstanding, is a warning sign that you need to act quickly.
The debtor company has no assets, but its customers do
This is where a trade debt differs most from a personal debt. The debtor company may own no land or vehicles in its own name, but it still has money that its own customers must pay it. A contractor who owes for materials may still have progress payments that the project owner must pay. A distributor who owes for goods may still be owed money by the shops that took the goods to sell.
After winning the case, the creditor can apply to attach these claims, which means the person who owes money to the debtor pays it to the enforcement officer instead. Who the debtor works for and who pays the debtor is often something a trade creditor knows better than anyone, because you are in the same industry. That information is the starting point for asset tracing and enforcement.
Steps from the first demand to getting paid
1. Stop supplying more. It sounds obvious, but many businesses keep delivering to a customer who owes them, hoping new sales will pull the old debt into being paid. The result is a bigger balance.
2. Demand letter. Set a clear deadline for payment and state that you will take legal action if it is not paid. A demand letter from a lawyer often changes the order in which a debtor pays, when the debtor has money but has been choosing to pay other creditors first.
3. Negotiate instalments in writing. If the debtor asks to pay in instalments, make an agreement that states the total debt, the instalments, and the consequence of defaulting on even one instalment. If a director can sign a guarantee in this agreement, so much the better.
4. Sue. A debt that is fully backed by documents is usually not complicated. A case with a lower claim value may go through faster proceedings than ordinary cases, and many cases end with a settlement in court.
5. Enforce judgment. Attach the money the debtor's customers owe, attach bank accounts, seize machinery, vehicles or land, and sell them at auction. If there is evidence that the debtor is moving assets during the case, you can ask the court to seize or attach them before judgment.
Prevent the problem before you open credit
The trade debt that is easiest to recover is the one prepared for on the day credit was opened.
- A credit application with the company's details, its authorised signatories and an address for sending documents
- Terms and conditions of sale that set the credit term, interest on default and the right to suspend deliveries
- A guarantee from the directors for customers with a high credit limit, because without one the creditor can claim only from the company
- Credit limits that are reviewed periodically, not limits that keep growing with the size of the orders
Selling on credit to business customers: set up the paper trail and the follow-up
The sections above cover what to do once a customer stops paying. This one is the routine that makes the debt collectible before that day. The credit application, terms, guarantee and limit are in "Prevent the problem before you open credit" above; what follows is the document chain and follow-up on top of them.
Tie each sale to a person who could bind the customer. Keep a recent company certificate and a note of the authorised signatories, and have the purchase order or contract signed by one of them or by someone clearly authorised. A sale agreed only by chat with a junior buyer is much harder to prove against the company.
Name the authorised receiver on the delivery note. Agree in the order or contract who may sign for goods or accept work, by name or job title, not "whoever is at the site". Ask for printed name, signature and date on every delivery note and photograph it. This answers "we never received it" (see "The evidence for a trade debt" above).
Get the invoice and billing note acknowledged. Send the tax invoice and billing note to the address in the credit application and keep proof of receipt: a signed or stamped copy, or an email with a reply trail. A stamped billing note also fixes the payment date you will chase.
Send a statement of account regularly and ask for a balance confirmation. Each month, send every credit customer a statement of open invoices and ask a signatory to sign and return it. A debtor's written acknowledgment, part payment, or any act clearly showing the debtor accepts the debt interrupts the limitation period under section 193/14(1) of the Civil and Commercial Code, and it starts afresh (section 193/15). A signed confirmation is evidence of the amount and protection against the clock. Silence is not acknowledgment, so an unanswered statement proves nothing.
Review an ageing report on a fixed cadence. Weekly for accounts, monthly for the owner: open invoices by days overdue, with the last payment and last promise to pay beside each line.
Decide in advance when a lawyer steps in. Written triggers stop the "one more month" habit. Examples:
- an invoice is overdue by a set number of days after two written reminders
- a promised payment date or instalment has been missed more than once
- the customer disputes the delivery note, or the signatory changes
- signs of trouble: bounced cheques, new directors or address, orders suddenly stopping, news of a rehabilitation or bankruptcy petition (see "Check the debtor company's status before anything else")
How we can help
We act for business creditors from checking documents and limitation periods, through sending demand letters, drawing up instalment agreements, suing, tracing assets and enforcing judgment until you are paid. We also draft credit sales terms and guarantee agreements for new customers. For an overview of collecting debts, see the guide to debt collection, suing debtors and enforcement of judgment, and if the debtor paid with a cheque that bounced, read more about bounced cheques.
If your business has several unpaid customers, send us your list of debtors for assessment. We will help you rank which to chase, which to sue, and which are close to being time-barred.
