Running a successful and more importantly, profitable organisation is the principal aim for entrepreneurs and those managing businesses, yet despite this many businesses are reluctant to take action to recover often large amounts of debt owed by customers, merely writing them off as ‘bad debt’. This unwillingness to pursue debts can be attributed to a common misconception that it is a fruitless endeavour and a waste of resources to chase money owed, consequently causing businesses substantial cumulative financial losses year upon year.
By following these simple steps to effectively pursing debt, you can successfully recover outstanding debts at minimal cost and effort to you and your business:
1) Terms & Conditions
Ensure that the goods or services you are providing are governed by your terms and conditions. It is advisable that your terms & conditions set out when payment of your invoices fall due and the interest rate that you are entitled to charge on the balance of any outstanding invoices.
2) Contacting the debtor
Before pursuing legal proceedings, businesses should send a letter to the other party notifying them of their debt and informing them of the intended course of action. Sometimes a threat of legal action can act as an incentive for debtors to make payment.
It is also worth bearing in mind the relationship between you and the debtor. When dealing with a loyal or once valued customer you may be able to negotiate a flexible repayment schedule.
Before beginning any formal proceedings, businesses should always first evaluate the financial position of the debtor. Doing this will allow you to establish whether the debt is ultimately worth chasing, ensuring that the debtor has either the funds or assets to enable you to successfully enforce any judgment.
4) Formal proceedings
In the event that it is necessary for you to consider taking formal action, there are a number of avenues for you to consider, including insolvency proceedings and county court proceedings. Depending on the value of the debt, once formal action is commenced, the debtor may become liable for any legal costs you incur. Prior to embarking upon formal action, speak with a specialist solicitor who will advise you upon the most appropriate, cost effective course of action.
Where you are unsure as to how to pursue business debts you should contact a solicitor who specialises in debt recovery. To speak to one of our specialist corporate and commercial solicitors regarding the options available to you contact Farleys on 0845 050 1958, or email us today.