How To Tell If My Business Debt Is Worth Pursuing

Running a business comes with its fair share of risks and challenges. One such challenge is dealing with unpaid invoices and the looming threat of business debt. Late payments from customers can have a significant impact on your cash flow, hindering your ability to meet financial obligations and potentially stalling growth opportunities.

Understanding the different types of business debt

One common type of business debt is late payment from customers. This occurs when clients fail to pay for goods or services on time. Late payments can have a significant impact on your cash flow and hinder your ability to meet financial obligations.

Another type of business debt is overdue invoices. This happens when clients neglect to pay their bills within the agreed-upon timeframe. Overdue invoices can lead to strained relationships with clients and create additional stress for your company’s finances.

Signs that your business debt is worth pursuing

If you have provided goods or services and haven’t received payment, it may be wise to take action.

One indication that your debt is worth pursuing is if there are repeated instances of late payments from the same customer or client. This pattern demonstrates a lack of consideration for payment terms and could suggest ongoing financial difficulties on their part.

Consider the potential impact on your cash flow and overall profitability. Unpaid debts can restrict your ability to grow and invest in new opportunities for your business. By actively chasing overdue invoices or late-paying customers who owe you money, you will ensure healthier financial stability for yourself.

Factors to consider whether to outsource your debt recovery

When it comes to deciding whether to outsource your business’s debt recovery, there are several factors that you need to consider. Each case is unique, so it’s important to carefully weigh these factors before making a decision.

Evaluate the likelihood of successfully recovering the debt. Has the debtor shown any willingness or ability to pay in the past from your in-house debt collection efforts? If you aren’t getting responses back from your debtor or no longer have contact details or your debtor (including address details) a debt recovery solicitors can help to trace your debt and encourage conversations to amicably settle the debt.

Another factor to consider is your relationship with the debtor. Is this a long-standing customer who has always paid on time in the past? If this is the case, passing your debt recovery to an expert debt recovery solicitors will help you to maintain an amicable relationship with your customers. This approach will help to minimise risk of late payments in the future.

Additionally, think about potential legal costs associated with debt recovery. Will taking legal action be cost-effective in relation to what you’re owed? Consulting with a lawyer can help you determine if legal action is warranted and what potential outcomes you would expect. At Lovetts we offer legal advice with our commercial litigation department. Our advice is tailored to your specific case, will give you an insight into the costs of pursuing your debt and set out a strategy to increase your chances of a successful collection.

Limitation Period in the UK

The Limitation Act 1980 says that any legal action founded on a simple contract cannot be brought after the expiration of six years from the date on which the cause of action accrued. 

This means that if you have a debt that any legal action must be taken within that six year period, otherwise you cannot pursue the debt after the expiry of that period. 

There are some exceptions to this rule, where the limitation period may be extended by an acknowledgment of the debt or indeed payment, but this will depend on the circumstances involved.

Lovetts is a specialist UK & International debt recovery solicitors with more than 25 years of industry experience. If your business has overdue debts that’s it’s seeking to recover, contact us today.

28 February 2024