Debt Recovery Do’s and Dont’s
Unpaid debts are unfortunately an everyday occurrence for many business owners and finance teams. Debt collection can be frustrating, time consuming and can seriously affect cashflow. But no business can afford to ignore debt recovery. “SMEs are racking up a collective £10.8 billion a year in their attempts to recover overdue payments – that’s an average of almost £11,500 each, or £955 a month. A huge 80% of all companies which experience late payments say they are being kept waiting one month or longer beyond their agreed terms before receiving payment.” (source: Bacs) However, there are some simple steps you can take to recover your debts effectively and efficiently – let us sum them up for you.
Do Be Organised
Sending your debtors a friendly reminder a week before payment is due is a useful practice to adopt, as it will hopefully keep your invoice first in line to be paid. As soon as a payment is late, chase your debt in a polite manner. Follow up regularly with your debtors to encourage prompt payment and to ensure you or your team are speaking with the correct people.
Don’t Go Round There With A Baseball Bat
We understand how infuriating it is when a company or person owes your business money. Especially when you were under the impression that you had a good working relationship. We strongly advise not to get aggressive, if it gets too much, invest in a stress ball for your desk!
Do Keep A Collections Record
Time is money for any small business – and time spent trawling through email and paper invoices could be spent elsewhere in a business. So it pays to keep a ledger and record of your dealings with debtors, this leaves them with little to ‘push back on’ if they become late payers in the future. Keep a record of the time, date and what was said, each time you speak to your debtor. This will help with future communications, if it is claimed that your invoice was not received or it was not clear that payment is due.
Don’t Be Embarrassed To Pursue Debt Recovery Measures
“Small businesses in the UK are owed billions of pounds in late payments, but new research has shown that a third are reluctant to chase slow-paying customers, because they are worried about upsetting them or feel embarrassed. Four in five, or 81%, say they avoid chasing debtors because they find the process ‘uncomfortable’, while one in five, or 19%, are afraid of antagonising customers, according to a study by automated credit control service Satago.”
Do Escalate It
Whether you’re the CEO or a Financial Clerk, outstanding debt is no laughing matter. The pressure to recover debts owing to your business can be enormous, and at times it can even feel like an impossible task. If you are owed outstanding debts, speak to a debt recovery solicitor who could collect debts on your behalf today – it could cost you less than a packet of crisps! We’ve found that over 84% of our Letters Before Action are paid without any further action being required. This is a formal letter that must be sent before any legal action is taken. For every £100 of debt recovered our clients pay on average just 35p.
Don’t Swear At The Debtor
Using profane language to get your point across will only make communications between you and your debtor more difficult. Refrain from sending threatening emails too, as these could be used as reasons to withhold payment. If you’ve already done that (oops) not all is lost. One huge advantage of using a debt recovery solicitor means you help detach yourself from the situation and any negotiations, which should hopefully take the heat out of the situation.
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