There are various points you should consider before "going legal". Some of these should be considered before you give instructions to a solicitor to warn the customer by letter that court proceedings will be started unless they pay the debt within a specific deadline, i.e. 7 days.Going Legal
1. Be Sensible
The court’s overriding object in every case is to deal with the case justly. So, before sending a Letter Before Action (LBA) or starting an action, you need to do everything a sensible person would to make sure:
•the customer knows exactly what you are claiming.
•you have dealt, as far as possible with any queries or disputes raised by the customer.
•you have given the customer a reasonable time to respond to your answers to its queries.
•you have done everything reasonably possible to avoid going to court.
•But that’s the aim of a good credit control procedure anyway!
2. Record Promises To Pay In Writing
Make sure any promises to pay the debt are recorded in writing (email is fine). Preferably get the customer to put them in writing to you. If the customer does not put their offer in writing, write to them yourself confirming what was discussed and agreed between you and them.
3. Commercial Considerations
•What is the most appropriate way of dealing with this customer?
•Will you upset them with further action? Do you mind upsetting them?
•What is the commercial position?
•Do you want to deal with them again?
4. Know What It Costs
You need to know the cost of the steps you are taking. Make sure you are familiar with the potential Legal Costs of taking legal action.
5. Cost/Benefit - Is It Worth It?
You need to be satisfied that the cost of taking proceedings, and possible enforcement, is worth the risk.
•Is it a case where the customer "won't" pay rather than "can't" pay? You may want to carry out credit checks before risking the costs. For example, are there any unsatisfied County Court Judgements CCJ's?
•If you are doubtful about a customer, you can instruct a solicitor to check if there are any current winding up petitions i.e. petitions which have been presented but where no winding up order has yet been made. These will not be revealed by the normal credit searches. A small charge for this service is normally made.
•Have you spoken to the customer recently?
•Have you checked that your customer is still there? I.e. the owner of a restaurant may have sold it and left but the new owner will still be trading under the same restaurant name.
•You need to consider the case as a whole right at the beginning. You must be aware from the outset of the potential costs of taking proceedings and of possible abortive enforcement.
•There is no "right answer" as to when to pursue a customer and when to give up (unless the customer is insolvent). You have to test things for your market and customers to find the right balance. One thing is for sure. If you don’t try and collect the money, you won’t get paid!
6. You Know Your Customer Better Than Anyone
Credit reports can tell you something but the data is fairly historic. Your company has recently dealt with the customer and will have as good a "feel" as any for the customer.