Fri 01 Jul 2022

Top tips for effective debt recovery

The knock-on effect of customers failing to pay their debts can be significant. Non-payment of debts by customers can cause very serious cashflow issues for businesses and could ultimately lead to insolvency. We're also conscious that you might not want your cashflow tied up in pursuing legal action.  In that situation we might be able to offer an alternative way to fund your claim.  It's called a success fee agreement. To find out more about the type of case where our success fee option provides an alternative way to fund a commercial litigation or debt recovery claim, click here. Meantime, here are our top five tips to help your business successfully recover what's due:

Do your homework.

Look the customer up on the Internet and look for any negative reviews or news - if there are any red flag stories about them consider whether you really want to get involved with them.  Also, carry out a credit check on customers before doing business with them. If the credit report recommends a maximum credit limit for the customer, make sure any credit you provide to them does not exceed this limit unless you're happy to take the risk.

Say what you mean and mean what you say.

Make sure your terms and conditions are up-to-date, clear and unambiguous.  They should leave debtors in no doubt about what is to be paid, when it is to be paid and what the consequences are for non-payment (such as additional interest).   Most importantly of all, make sure to give these terms and conditions to the customer before the goods/services are supplied and the order confirmed.  You need to make sure that your terms and conditions are part of the contract.

Prevention is better than a cure.

Your terms and conditions might allow 30 days payment terms.  Consider offering a small discount if the debt is cleared within 7 days from the invoice date.  This often results in speedy settlement of debts and means a smaller number of debts have to go into a credit control process.

Be robust.

Have a strong credit control system and be proactive. By all means issue a credit control letter or email if payment isn't made on time but also think about picking up the phone and speaking to your customer. Remember to keep a record of the conversation and any promises to pay on a certain date. Follow up with another call or email if payment isn't made when it was promised.

Be consistent

Some debtors deliberately choose not to pay creditors that don't have a consistently strong approach on debt recovery. Make clear that any and every failure to pay on time will be addressed.

Next Steps?

If you've got an issue with an unpaid debt we can help. Our top-rated commercial litigation and debt recovery teams are experts in recovering money that's due and resolving disputes over unpaid invoices. We can offer advice on improving your credit control processes, training for your credit control team and overhauling your contractual documentation and terms and conditions.   

Click to find out about the sort of situation where our commercial litigation success fee funding option can be used.

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