At one point or another, every business will come across a customer who is refusing to pay them. The sooner you act on a late payment, the better the outcome will be. If you are not firm enough with delayed payments, when debtors are able to pay you they will pay their firmer suppliers before you. The businesses that don’t have a robust credit control process are possibly more likely to get into this situation sooner, however it doesn’t mean that the ones who do have a good system are exempt. If you don’t have a credit control policy, read our blog post ‘how to get paid on time‘ for some tips on how to create and enforce your own credit policy. If you do have a strict credit control policy in place for your finances which you have followed and your still left unpaid, you have a debt problem.
Once you have established that you do have a debt problem, there are 3 options you could take to overcome this.
- Continue to chase payment yourself with phone calls, letters and emails.
However as the saying goes, if you do what you’ve always done, you’ll get what you’ve always got. If doing this has got you nowhere, it may be time to think of alternatives. Creditsafe offer Debt Chaser, which allows you to create and send professional debt chasing letters to your debtors. With a range of templates to choose from, you can decide what to send, when to send it and Creditsafe do it on your behalf. Our debt chaser service can help increase your chances of debt recovery, and minimise your costs.
- Instruct a debt recovery firm to recover the debt on your behalf, or
- Instruct a solicitor to take legal action against your debtors.
With the last two options, you can do both of them, but not at the same time. It’s personal preference which route you go down; as only you know what impact the debt will have on your company if it’s not repaid. It is also your choice how much time you are willing to spend chasing the debt and how serious the matter is.
Logically and commercially, the best course of action is to instruct a reputable debt recovery firm first and if they are unsuccessful they should be able to advise you if further legal action is a viable way to recover your money. The reason we advise a debt recovery firm first is because there are usually no upfront costs to instructing an agency to chase the money for you, and they generally work on a no win no fee basis. They can also begin action immediately, where-as if you go through the with legal action, there are substantial costs involved along with a hefty wait of a possible 30 weeks to get a hearing.
With debt recovery, your maximum costs are limited to an agreed percentage of any money recovered. However with a solicitor, if your debt is disputed there will be ongoing charges from your solicitor and they may even bill you for every minute of their time. As neither option is guaranteed to retrieve your money, it makes sense to try the quickest and lowest cost option first before spending money. Our advice is to then instruct legal action on cases where the costs and chances of recovery are a better choice than writing the debt off and claiming tax relief.
|Debt Recovery||Legal Action|
|Can recover costs?||Yes||Yes|
|Will handle disputed debts?||Yes||Yes|
|Can handle international debts?||Yes||Yes|
|Time scale for action?||Immediate||Up to 30 weeks to receive hearing date|