Part 1 of top tips for successful debt recovery included; (1) How to ensure your invoices are timely and accurate; (2) The importance of checking and providing your terms and conditions; (3) Effective credit control; and (4) the importance of keeping accurate records of correspondence. (Read Part 1 here
Below is a continuation of further tips on successful debt recovery, which can assist in keeping the money rolling in…
- Know your customer/client
Does the debtor have the means to pay you? If the debtor is an individual, do they own a property or are they employed? It may be that you issue Court proceedings to obtain a County Court Judgment (CCJ), but still must take further enforcement action to recover the debt if the debtor fails to pay. Are you dealing with an individual, a partnership or a limited company? If the latter, who are the directors and where is the registered office? It is important to know who your customer is. Too often when solicitors are asked to chase debts, it is apparent that the identity of the debtor is not known.
To increase your chances of successfully recovering the debt, it is important to verify your customer’s identity, trading status and their ability to pay before trading with them. Where possible, you should:
- Always record full details e.g. full name, address and land line telephone numbers;
- Collect identification documents and conduct a company search at Companies House (in the case of customers who are limited companies);
- Run credit checks and/or obtain trade or bank references before contracting with them;
- Establish who will be your contact and who will be responsible for payment of your invoices; and
- Ensure that the entity you are contracted with is the one placing the orders. Be vigilant that a subsidiary or sister company does not try to place orders.
Business debts are different from personal debts and they are quite separate unless there are personal guarantees in place.
- Be pragmatic
Whilst you always want to recover the full amount owed to you, what happens if the debtor cannot afford to pay the amount owed and how are you going to achieve the best outcome? It is worth considering two questions; would you be willing to accept a lesser sum in settlement of the debt or would you be willing to agree to an instalment plan?
- The foreign company
It is harder and more expensive to recover debts where the debtor is based abroad, so consider taking additional security first. You should be aware that as Scotland and Northern Ireland have their own legal and Court systems, they are considered foreign jurisdictions by the English Courts. The additional security you may want to consider is as follows:
- Obtain personal guarantees or other security;
- Ask for a deposit/payment in advance;
- Consider obtaining insurance to protect against non-payment.
- Notice the Warning Signs
Excuses such as “cheque is in the post”, “missed the cheque run” and “can you please make the invoice out to another company” are very common and should raise alarm bells, especially if this is a regular occurrence. You should also watch out for multiple companies with similar names and directors who have been involved in other failed companies. The general rule is if it sounds too good to be true – it usually is!
- Take Legal Action!
No one relishes the thought of having to take legal action against debtors, but the money you are owed is rightfully yours by law. Sometimes patience just is not the answer, especially when your business is put at risk because of the debt.
We can help you recover debts you may have and will tailor our service and our fees to your own specific needs. If you would like advice on any matter which is keeping you up at night, including debt recovery, Griffin Law provides prompt, commercially astute and cost-effective advice to their clients.
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