At some point, every business comes across clients who don’t settle their invoices on time.
Whether it’s a case of “can’t pay” or “won’t pay”, the effect is the same: a disruptive and potentially damaging interruption to cash flow.
Midlands law firm Else are debt recovery experts in every kind of scenario. The best way to deal with debts depends on the nature of your business, the type of customers you have and the relationship you have with them.
Our debt recovery solicitors in Burton on Trent, will ensure that the right kind of action will be taken against your debtor – and as soon as possible.
Here are our five steps to debt recovery:
Step One – Withhold Your Services.
The first step when dealing with a debtor is to stop, or at least threaten to stop providing any further goods or services until they pay. Believe it or not, this works in a lot of cases.
Step Two – Take Quick Action.
If withholding your services doesn’t work and the debtor is not responding to emails, letters, or numerous phone calls, you may need to take alternative measures.
It could be that your customer is having financial problems. If this is the case, we would advise you to take action quickly. Fast action can help you to ensure that you get paid before other creditors. Leave it too late, and there may not be any money left.
Step Three – Claim Late Payment Compensation.
It is worth remembering that if an invoice is overdue, you are entitled to claim compensation under the Late Payment of Commercial Debts Act. You can also claim interest for the overdue period at a rate of 8% pa above the Base Rate.
Pointing this out to customers can act as a lever to get them to pay. Including it in your terms and conditions is a good idea to establish this from the outset: it can help ensure clients remember to clear their invoices before they become overdue.
Step Four – Begin Legal Proceedings.
If you still haven’t been paid, then you can go down the legal route in order to secure a County Court Judgment (often referred to as a ‘CCJ’). If you win, you will be able to claim costs, including the court fees.
The first stage in this process is to issue a Letter Before Action (LBA). This gives the client a final opportunity to pay, with a date by which they must settle. If they do not meet this payment date, the next step is to begin County Court proceedings.
Step Five – Know Your Rights.
The debtor has 14 days to acknowledge that the papers have been served to them. If they fail to do so, YOU can ask the court to grant a Judgment in Default. If they do respond, this may be to either defend the claim, admit that they owe the debt or they can part admit and part defend the claim.
If they file an acknowledgment of service with the court this allows them a further 14 days to file their response, or again you can request Judgment in Default.
A Judgment in Default means that your customer will go on record has having a CCJ against them. This will have a negative effect on their credit ratings.
Once a CCJ has been issued, you will have some choices.
In some circumstances you could take out a Third Party Debt Order (TPDO) which enables you to recover the money from a third party who is holding funds for the debtor, usually their bank.
Another option may be a Charging Order, which secures the debt against property.
Most common in the case of debts up to £5,000 is a Warrant of Execution, which allows bailiffs to attend the debtor’s premises on your behalf and seize goods to the value of the debt, which will be auctioned. If there is still outstanding balance the process will be repeated until the debt has been settled.
For more information and advice about what to do if you have unpaid invoices, contact our expert debt recovery solicitors by sending us a message or call us on 01283 526200.