Debt Recovery: Know your customers before you give them credit!

At Else Solicitors our debt recovery specialists have identified recurring trends having a negative impact on the effectiveness of credit controllers across the UK.

Basic financial details are being missed off the checklists when taking on a new client making the role of a credit controller chasing an invoice payment very difficult.

We have identified ‘7’ essential details your teams need to take record of when accepting a new customer account. They may seem obvious but these inaccuracies are having a huge knock on affect when attempting to recover money from a debtor.

1. Name

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.

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.

3. Address

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 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.

4. Identification

In confirming the above details:

  • Ask for any identification when a new customer/client approaches you
  • Check the address they have provided
  • Look a limited company up on Companies House
  • 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 good practice 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, you could 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, you could 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 has their own 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.

7. Communication

Communication is key in successfully collecting monies owed. Our recommendations include:

  1.  Keep records of all communications
  2. 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
  3. Supply the purchase order number – many companies require you to quote a purchase order number, otherwise they will not pay you
  4. Follow up any emailed invoices with a chaser to ensure they received the bill, it may have ended up in their junk mail folder
  5. You may also like to clarify…
    a. Confirm how much they owe and when you need payment by
    b. 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

And finally, a typical response from debtors is that they did not know there was anything outstanding. In some cases this may be true but make sure 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.

You may also be interested to know that you can add Late Payment Compensation and Interest on a business to business debt.

How we can help you

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.

For more information relating to credit control procedures and chasing payments, please contact Laura Charles on 01283 526210 or via

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