A Guide to Business Debt Recovery
In the UK, it is estimated that a staggering 30% of all business invoices are not paid within the agreed terms. As well as this, 1 in 5 business insolvencies are attributed to late or non-payments.
It is clear from looking at these figures that the issue of late payments in business can cause serious issues. Following the Covid-19 pandemic, this problem has grown, with many business owners resorting to taking desperate measures to help their company survive.
Every business owner knows how stressful and frustrating it is when they have provided goods or services but have not been paid. Many debtors will go to almost any length to avoid paying what they owe, and some businesses can struggle with the consequences.
Maintaining a stable and healthy cash flow is crucial when running a business. To do this, any cases of unpaid invoices and debt need to be acted on as soon as possible. When facing this situation, many business owners are unsure of the best ways to proceed.
Expert Tips for Collecting a Debt
There are many different options available for recovering a business debt, and each one must be carefully looked at before committing to it. Outsourcing the enforcement of a debt to a third party is always a good option, but some basic steps can be taken to aid in the recovery process.
Contact the Debtor
Before taking any further action, it is appropriate to contact the debtor and professionally remind them of their payment obligations.Many debtors may have a simple reason for why they have not paid, and a short conversation may go a long way towards resolving this.
When contacting the debtor, you should always make a record of your conversation, as you may need to refer back to it at a later point. For example, if you are sending a letter, you should use a recorded delivery service. As well as this, you should also set a cutoff point for your efforts. Many businesses have spent so much time trying to chase a debt that it is no longer cost-effective to do so.
Make it Easy for the Debtor to Pay
This may sound like a simple step, but accommodating the debtor concerning payment options can help you to get paid faster.
For example, many clients may be in a difficult financial position, especially since the beginning of the Covid-19 pandemic. If this is the case, setting up a repayment plan might be preferable to demanding the full sum of money be paid at once.
Recognising a client’s circumstances will ensure that you are repaid and at the same time strengthen your relationship with them. They will know that you treat your clients fairly and will be likely to do business with you again.
Send a Final Notice
If you have contacted the debtor and they are not responding, it is completely acceptable to send a final notice letter to them. This letter should also be professional in tone, and inform the debtor that if they do not pay then you will have no choice but to escalate the matter.
In many cases, this is enough to prompt payment, as some debtors may lose their nerve at this point. Unfortunately, some will aim to “call your bluff”, and will do anything to avoid paying a debt.
Involve a Debt Collection Agency
If your debtor is avoiding you and your attempts to make contact, it is usually a sign that they do not intend to pay you. This is understandably frustrating, as by now you will not only have provided goods and services but also spent time and money chasing down the debt.
Hiring a professional to enforce the collection of a debt is a good decision at this point, as you will be able to focus on your core business whilst your debt is being collected. As with any service-based industry, there are many choices when it comes to finding a solution.
One such option is to instruct a professional debt collection agency. An agency such as this will be able to recover your owed money promptly and professionally, ending the matter amicably for all parties. There are many types of debt collection agencies, and some specialise in different areas of debt recovery.
For example, Federal Management is the UK’s leading specialist commercial debt collection agency. They focus on recovering business debt, for example on occasions where medium or larger organisations are owed money by a client.
Other agencies specialise in debt collection for smaller enterprises, such as small businesses or for those who are self-employed. One example of an agency like this is Frontline Collections, which is regarded as the UK’s best private debt collection agency.
It should be noted that whilst debt collection agencies do charge a figure that is a lot lower than alternative methods of debt collection (such as court action), it still incurs a cost. This should be factored in when you are considering a course of action.
