Do you have clients and customers who don’t pay on time? Don’t worry, you’re not alone – there are thousands of companies in the UK who have this problem. However, there are ways of recovering the debts if you act in the right way.
What is the debt recovery procedure?
At Abacus Solicitors, our debt recovery solicitors are here to share 7 actions you can take to help recover the money owed to you.
Although you want to be paid, it’s important to also be committed in your pursuit. Late paying customers will come up with all sorts of excuses to avoid payment. Friendly, professional and firm is the approach you want to take.
If you are not committed or not in a firm mindset, customers will take liberties. It may be that you are not very good at negotiating or confronting late paying customers, in which case, delegate this task to someone in the company who is. Be sure to make it part of their job and not something they do as an afterthought.
Plenty of entrepreneurs allow late paying customers to get away with late payments. Either they don’t have the time to chase, or don’t want to confront and offend the customer.
Here is how you should follow up:
- Using your accounting software to analyse your receivables at least once a week.
- Begin a system that makes you follow up on payments that are 3 days, 1 week, 2 weeks, 30 days etc late. Make sure you stick to this system.
Send a reminder letter
Letters are a friendly way of letting your customers know that payment is due. It’s a good idea to send the letter a few days before the due date. Draft a standard letter which you can use in each situation. As it’s a standard form letter, customers won’t take it personally. Make sure you end the letter by asking your client or customer to contact you to discuss the payment if they are having trouble meeting the same. This might be a sigh of relief for the customer if they have an issue from their end and may prompt them to come to a solution with you rather than bury their head in the sand.
Get on the phone
If you haven’t received payment or heard from your client/customer after 30 days, it’s time to pick up the phone. Phone calls are much more difficult to avoid and apply more pressure than a letter which can be easily ignored. Getting your customer on the phone can encourage them to tell you what is really stopping them from paying you and you can speak to them to investigate solutions to the same.
If it has reached this stage, your main aim is to figure out what exactly the problem is and how can you get paid from this situation. Decide how valuable this customer is for you and how they can recover from this difficulty to once again become a paying customer. Here are the common options you can take:
- Obviously, you want all of your money back. An installment plan is usually the best solution to achieve this.
Someone who can’t pay you £10,000 in one go might be able to pay £500 per month over 20 months. Depending on the original arrangement with your client, you may be able to charge interest and administration fees. However, depending on your relationship with the customer, and also taking into account whether the added charges will make it harder for them to pay, it might be better not to include these sums.
- Although not ideal, partial payment is another solution, especially if you can’t afford a blow to the cash flow that an installment plan would create. You may have to accept £7000 instead of £10000 as a quick way to recover cash to avoid a loss in the future.
Debt recovery solicitors letter
If these 5 steps have got you nowhere and the customer hasn’t budged, it’s time to take legal action. Have your solicitor write up a demand letter. This is a formal written letter that will threaten the prospect of legal action if the debt isn’t paid. Those customers who aren’t scared of phone calls or letters from you and your business should be more threatened by a solicitor’s letter especially if the same threatens action against their business or them personally.
Usually, a solicitors letter is enough to prompt some communication from the customer, if not payment, and talking with a solicitor can help you define your case in legal terms. A solicitor will also identify what further action is available to you should you need it.
Consider court as an option
Your solicitor can also advise if issuing court proceedings is worthwhile and what type of court proceedings is best suited to your claim. Usually used as a last resort, you may want to make a claim in court if you can’t settle the matter in any other way.
If your claim is not disputed then you can seek a quick Judgment and determine how you can have this Judgment enforced, for example by County Court bailiffs or Charging Orders. A solicitor can advise you as to the enforcement options open to you and which are worthwhile to pursue.
If disputed your claim will go through procedural steps up to a final court hearing where a Judge will decide the outcome. If your claim is for a lot of money, or likely to be disputed then it is advisable to have a solicitor fighting your corner. A solicitor can ensure that all documentation is prepared correctly and will provide you with the best chance to win your claim.
For more advice on debt recovery, get in contact with Abacus’ expert solicitors in the contact form at the top of the page, or give us a call on 0161 833 0044