Court costs can be expensive. It is very frustrating when you have to pay money to recover a debt.
However, your business can take simple measures to avoid Court costs.
Most debts can be recovered using the pre-legal process. However, you must have some basic information to do this.
If you are already chasing late or bad debts, then please contact Laura Charles, Acting Head of Debt Recovery today on 01283 526210 or on email@example.com. The sooner you take the needed steps, the faster you get paid.
This short article outlines the information you need and gives you some useful tips on how you can make it easier to recover debts before you have to go to Court.
You must have their correct name. You would be surprised at how many businesses do not know or have the correct name of the person or business they are trading with. If you must start Court Proceedings and you have an incorrect name, then your claim will be invalid. All your Court fees will be lost and you will have to start again with a new claim.
2. Trading Entity
You need to know how your commercial clients are trading. For example, is Jones and Sons operating as a sole trader (e.g. Mr A. Jones trading as Jones and Sons) or are they a partnership or a limited company?
If your debtor is a limited company, you can check whether they are still trading or have a look who their directors are on the Companies House website.
It is important that you have their correct address. This can save time should the debt “go legal” as it may be that a trace is required which incurs both a cost and more wasted time for you. A limited company will have a registered office address (again available on the Companies House website) but there are sometimes trading addresses too.
In confirming the above details:
- Do you ask for any identification when a new customer/client approaches you?
- How do you check the address they have provided?
- Do you look a limited company up on Companies House?
- Do you ask for a driving licence or passport and a utility bill for any directors?
In some industries, you are legally required to verify the identity of your customer or client. However, in many cases it is good business practice to do so, even if you are not legally obliged.
It is a good idea to have a client on-boarding process in place to gather or check this information, especially for businesses that have high value orders.
5. Money on Account
Although not appropriate for some businesses, do (or should) you ask for money on account or money “up front”?
This will go some way to covering the work you are doing. You will also have their bank details should you need to take action to freeze their account and get the rest of your money.
6. Director Guarantees/Personal Guarantees
When you supply a limited company, do you ask one of the Directors to sign a personal guarantee? If you have a signed personal guarantee and the company goes under, then you can chase them personally. This is only useful if the director himself has cash or assets so maybe some digging on the directors is necessary as mentioned above.
You would be surprised though at how many directors own multi-million pound homes outright but won’t pay your bill.
Communication is key in collecting debts before they “go legal”. For example:
- Did you invoice the right person on time? Many invoices are mistakenly sent to the person who placed the order when it is needs to go to their finance department.
- Did you need (and if so did you have) a purchase order number? Many companies require you to quote a purchase order number, otherwise they will not pay you.
- Is your debtor even aware that there is a balance outstanding to you? If you e-mailed the invoice to them, it may have ended up in their junk mail folder.
- Have you written to them or emailed them and confirmed how much they owe and when you need payment by?
- Whose terms are you paying on? You may want payment in 30 days but some companies pay only at the end of the month for invoices received the previous month. For example, if you invoice on 5th March, you will not get paid until 30th April. Some companies still pay on 60 or 90 day terms.
A typical response from debtors is that they did not know there was anything outstanding. Of course, in some cases this is not true but do you have a procedure in place for chasing overdue payments? For example, on 30-day payment terms you can issue a Letter Before Action on day 31.
For a commercial debtor, they then have 7 days to make payment. You should state in the letter the amount outstanding, what the debt relates to and give a date for repayment. You should also advise them that if payment is not made by that date then you will pass the matter onto your solicitors.
Did you know that you can add Late Payment Compensation and Interest on a business to business debt?
Else Solicitors has a long-standing reputation as the debt recovery solicitors. We work hard to ensure that you get paid whether this is through rigorous credit control, debt collection letters or legal action. Debt recovery is one of the things we do best and we can collect late and even “old and abandoned” debts on your behalf.
You can also use Else as an extension of your credit control procedure. Many businesses have found this to be highly effective. It saves you time so you can concentrate on your “good clients” and removes the frustration of chasing late payers.