Debt Recovery Series – 2. Don’t let the bad penny become the rotten apple
This is the continuation of the debt recovery mini series. Please see previous articles...Back to News and Events
This is the continuation of the debt recovery mini series. Please see previous articles here.
Once you have gathered all of the information that you can on your client and undertake work for the supply of goods, an invoice will usually be raised. Most of your clients will pay that invoice without question and your business can continue to operate effectively and profitably. However, what happens when that one bad penny doesn’t make payment? You need to ensure that you have a robust system in place to ensure that that one bad penny doesn’t turn in to a bad apple and spoil the rest of your apple cart. Ultimately, a bad debt can be a significant drain on resources within your business and, in some circumstances, one significant bad debt may mean that you will have to close your business entirely.
As soon as your payment terms are breached, you should have a system in place whereby an initial letter is sent. This will usually be a polite reminder that they have not made payment and you assume that this is simply an oversight. You remind them of your bank details or any other method of payment that you may offer. You should also ask them to make payment by a certain date. This should be a fairly standard and non confrontational letter.
If payment is not made off the back of your gentle reminder, a more strongly worded letter should be sent. It is entirely up to you how many layers you place within your credit control system. I would not recommend allowing forever and a day to make payment before you escalate matters further ( see below).
In this more strongly worded letter you should probably no longer be giving them the benefit of the doubt. They are late with their payment and following your previous letter, this is obviously no longer an oversight. You should ask them to make payment by a certain date, again reiterating your payment methods to assist them. You should make it clear that if payment is not received by the specified date you will take further action. Whether you define that further action as sending the matter to your litigation team (which may well be us as an extension of your business) is entirely up to you.
We can assist in the provision of such credit control letters should you require. Please do contact us for further information in this regard.
You may ultimately have to take the step to instruct Solicitors to try and recover the money for you. Your credit control system may have been exhausted with nowhere further for you to go internally. In this case you may need to address the situation by employing an external party to deal with things.
Depending upon the level of the debt, your costs associated with instructing a Solicitor may well be recoverable. You may also want to ensure that your terms and conditions are reviewed by our commercial team with a view to ensure that you contractually specify that any costs associated with recovery of the debt are recoverable. Please contact our commercial term in this regard.
In order to instruct us, all you need to do is get in touch with us. We will ask you to provide us with certain information (including copies of invoices and previous correspondence chasing the debt). We will then arrange for a pre-action protocol compliant letter to be sent to your debtor. This letter is necessary prior to the issue of proceedings to show to the Court that you have done all that you possibly can (together with your previous credit control correspondence) to try and avoid taking the matter to Court.
Should you require any assistance in relation to debt recovery then please do not hesitate to contact Sarah-Jane Dunhill, Head of the Litigation Team for further advice and assistance on 01270 527054 or by email email@example.com
To see the next article in this series please click here