Debt is often avoidable but you must act fast
So many businesses want to believe they will get paid. They don’t want to believe that people will avoid payment, when all the red flags are raised, alarm bells ring , they still think. it will b ehere tomorrow.
Many businesses who are about to default are in denial themselves, they may genuinely want to pay, consider a payment plan, but get a payment before its too late.
Other businesses know they wont pay you, they will use every excuse under the sun, they will promise everything and deliver nothing. You should act as soon as you feel this is happening. Stop credit, remove products, services, make them have to pay.
And if all else fails, have processes in place and use them. Speed and firmness are the watchwords. Send your notices, withdraw your risk and start action. The fresher the debt the easier the collection,
Thoughts
When should you act?
Every business is different and you know best in relation to how exposed you are to the fall out of a bad payer.
Have they received goods? Can you cut off your service? Is there anyway you can recoup or lower the loss? If you can do, and do so quickly, continuing to a supply a bad payer is only going to make the hit you take, bigger.
If the goods or service have been delivered, you must act quickly as soon as you believe there is a risk of bad payment. Increase your collection efforts. Call more, Email, start putting things in writing that yo may rely on later.
A late payment progresses to bad, then unrecoverable debt so quickly, act fast and lower your risk
How can we help you?
FAQ
Frequently Asked Questions
We cover some common questions below
In the UK recovery costs are enshrined in law ( The Late Payment of Commercial Debts (Interest) Act 1998)
You can claim statuary interest for up to 6 years when the debt becomes statute barred. Obtaining any payment or admitting the debt starts this clock again. Unless stated in your Terms and Conditions:
- You can claim 8% plus the bank of England’s base rate.
- Fixed costs and Disbursements
- Compensation for Late payments
- Loss of earnings for witnesses
Protect yourself in your contract, add clauses that may include
- Expectations or responsibilities that validate the invoice to reduce extra tasks added by the debtor before payment is made
- Agree stepped payment if its a large project
- Add clauses to place burden of full costs onto the customer for recovery
- And cancelation / early termination fees, these can be used as leverage
- Add a statement of work
- Set none payment action into the contract. ie termination dates etc
- Set costs to cover extra work by your credit control team as well as debt agencies
The quicker you act, the greater your chance of recovery. It is that simple.
Business close, phones get cut off, staff leave, all these things make payment harder to obtain. And once they are struck off from companies house, go into administration etc, your money is as good as gone.
Ensure your credit control team are thorough and in control of their accounts. If you see a red flag, act quickly, internally and then externally with an agency such as ourselves.
Debt can be collected in the UK for up to 6 years before it is statute barred, admittance of the debt or payment against it starts the clock again. Anything over a year is harder to collect but a good agency will work these accounts but expect to pay higher charges if recovered. By acting quickly you improve your chances and lower your recovery costs.
An account on a closed LTD business or one heady into administration is likely not to be recovered, it is important to act fast before its to late. Persistence will often lead to a payment.
Overall, if you can support the debt, the debtor is liquid and the invoice and contract are valid. Recovery chances are high, remember though, even if an account goes to court, you may still not receive payment. You have to enforce judgements.