Sales are often described as the key to a successful business. In reality, however, keeping a keen eye on your cash flow is just as important. It is all too easy to overlook late payments as ‘one of those things’, but customers that pay late, or not at all, could be inflicting serious damage to your business.
Before taking matters to the point of issuing Court proceedings, you are expected to send a formal letter of claim to the debtor, setting out the basis of your claim and providing copies of all relevant documents in support of the claim. The letter of claim will also impose a deadline for payment.
If the debtor fails to discharge the debt in accordance with the deadline imposed, then it will be necessary to issue Court proceedings to recover the same.
If the value of the debt is less than £10,000, then it is likely that the matter will be allocated to the small claims track. Claims with a value of more than £10,000 are likely to be allocated to the fast track or multi track and different procedural rules apply to these claims.
Our top tips for dealing with debt recovery:
1. Check your terms & conditions
What are your payment terms and do they allow you to claim interest or any statutory compensation on any unpaid invoices?
2. Set a deadline
Before instructing solicitors to recover the debt, give the debtor one last opportunity to pay. Impose a deadline for payment and stick to it!
3. Be organised!
Have copies of all the relevant paperwork (invoices, written contracts etc) available. This documentation will be required to evidence your claim. Make sure you keep copies of any correspondence passing between you and the debtor.
4. Know your opponent
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 have to take further enforcement action to recover the debt if the debtor fails to pay.
5. Be pragmatic
Whilst you want to recover the full amount owed to you, if you think that the debtor cannot afford to pay the amount owed, it is worth considering whether you would be willing to accept a lesser sum in settlement of the debt or whether you would be willing to agree to an instalment plan.