In these difficult times cash is king! However many individuals, sole traders, firms and companies are using these difficult times as an excuse not to pay outstanding debts; including invoices, loans and contractual payments.
So what can you do when faced with, or to avoid, this situation?
- Act quickly. The older an invoice becomes the harder it invariably is to recover. The initial satisfaction and appreciation the customer had of the effort and work undertaken will have worn off within a matter of weeks …if not days. The reality of making payment is a different matter entirely. Chase a debt promptly with an initial polite letter and a strict time period for payment. A solicitor’s letter demanding payment within 7 days often forces a debtor to respond but much will depend on how old the debt is and how willing the debtor is to engage.
- Ensure you have as much information about the debtor as possible. It is imperative that you know your customer. You may know the individual you deal with but in what capacity? Are they acting as an individual, a sole trader, a partner in a firm or a director of a company. Are they authorised to act on behalf of the organisation (entity) they represent? The type of entity that you contracted with, whether individual, firm, company or otherwise will determine the best way of pursuing and recovering payment.
- Make sure that for individuals you have their full name, including all forenames that are often needed when undertaking bankruptcy searches or ascertaining what property they own.
- Take up financial or personal references where appropriate. Consider requesting references from suppliers to see if they have encountered any problems with payment.
- You may wish to limit exposure by setting internal credit limits. Many individuals and organisations fall into the trap of giving customers extended credit, particularly if they are relatively new customers who have promptly paid some earlier invoices ( often for far smaller sums) and the first substantial invoice is then not paid.
- Do you have terms of business? These can be extremely useful particularly if containing retention of title clauses in respect of goods supplied and not subsequently paid for.
- Keep records of all invoices. A solicitor will promptly require these when demanding payment from the debtor and commencing appropriate enforcement methods.
- A solicitor can advise on the various enforcement methods that can be taken prior to issue of court proceedings in an attempt to recover payment, or to reach a negotiated payment settlement by instalments with or without security. Statutory Demands are an effective way of placing sufficient pressure on an individual or company who would rather pay a debt than face bankruptcy or winding up. These however need to be dealt with carefully, and served properly, in order to comply with strict regulations and to be valid.
- Where necessary court proceedings should be issued, judgment obtained and then enforced. This is particularly so if there is a risk of an individual being made bankrupt by other creditors or a company being placed into liquidation. A judgment is only a piece of paper, and worthless until enforced, but a solicitor can advise on the appropriate enforcement methods that are likely to be most effective in the circumstances of any given case.
We recognise the difficulties faced by many in these extraordinary times in recovering outstanding debts. We are here to help and always willing to have an initial no charge discussion as to how we may be able to assist, particularly where your debtors are taking an unfair advantage of the current circumstances.