Recovering debts is never easy. Even for big corporations with fancy legal departments and scary letters . Having specialized in debt recovery for over 20 years, we have written 4 things you should consider when recovering your debt.
Information is Key
Having information on the debtor and how much is owed is crucial to effective debt recovery. By issuing out invoicing s you can track how long payment hasn't been made and adjust interest attributed from late invoices . Having information on the key figures such as financial director or credit controller also puts you in the best position in terms of reaching out to them and coming to an agreement before taking legal action. In addition to legal action, having information on the debtor also puts you in a strong position if the debtor decides to dispute your case. Often times cases are lost because of the lack of information .
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Assess Your Options
When looking to recover a debt you need to access what the right steps are to recovering the debt efficiently. You may need to ask yourself, Is the debt owed by an individual or a business? Are the debtors fully aware of your terms and conditions? Or have you contacted the debtor to seek an arrangement to preserve the trading relationship?
If you send a Letter Before Action to your debtor but you do not receive a satisfactory response then the next stage in the legal process is to issue legal proceedings through the County Court. This is a formal process where the debtor will be sent a court form requiring them to pay the debt, plus interest and costs within 14 days.
If you are looking to recover a debt that is then disputed then you need assess; how best to approach the case, whether its taking legal action. Alot of legal services offer legal advice for dispute resolution which has been proven to help businesses allocate their budgets correctly in terms of recovering debts.
In addition , If a debtor does not make payment on demand and the debt is not disputed, they are technically deemed insolvent. If you are concerned that your debtor may have other creditors chasing payment from them, commencing Winding Up Proceedings against a company or Bankruptcy Proceedings against an individual means you could jump straight to the front of the queue for payment.
Use The Law on Late Payment
The Late Payment of Commercial Debts (Interest) Act 1998 has two purposes. Firstly, to compensate creditors for the late payment of debts. Secondly, to deter late payment. It only applies to the commercial supply of goods and services where you don't have a provision for interest in your Terms of Business.
In brief, for invoices that are not paid on time, it enables you to claim interest, compensation and (for orders placed after 16 March 2013) your reasonable costs of collecting the debt where these exceed the compensation. If you have a clause relating to late payment interest in your terms and conditions, you must charge interest in line with the amount stated.
If not, you are able to use the Late Payment of Commercial Debts (Interest) Act 1998 and claim interest at 8% over Bank of England Base Rate
Consider Outsourcing to Specialist debt collection firms
Outsourcing your debt recovery can help reduce your costs as you will stop spending money on overheads such as employing extra staff to chase payment. When you use debt collection solicitors, there is a higher success rate of recovering money. Customers are more likely to pay if they receive a letter from a solicitor. This is often because they know that the threat of legal proceedings is serious enough to provide sufficient motivation to ensure the debtor makes payment of your debt a top priority.
When a payment becomes overdue, it's important that you act quickly to collect. The longer it takes for a debt to be recovered, the more difficult the process of recovering becomes. However, in the world of business that time moves fast, and sometimes we feel like there aren't enough hours in the day to deal with everything.
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