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10-May-2007
Manage your debt...
The payment date has come and gone. You've sent letters and made phone calls but still no payment. It's time to bring in the solicitors...
Everyone who runs a business knows that cash flow is the lifeblood of any business. There is nothing worse than having worked and hard to complete a job and not getting paid for it. Most businesses allow a short credit and problems often occur when this period passes and payment is still not made.
Making sure customers pay their bills on time can be difficult. It's a serious issue - late or non-payment of debts can cause cash flow problems - and could even force you out of business.
The key to managing cash flow is not to let your debtors get out of hand. Effective credit control will monitor all unpaid invoices, including any that are in the credit period. Just because an invoice is within that period does not mean that you cannot contact the client, just that you cannot take legal action! If you keep in contact, you can find out if there is a dispute before the period expires. This will give you an opportunity to investigate and, if there are any grounds for the dispute, a chance to resolve it. Maintaining good client relationships will nip any problems in the bud.
The question then is: what are you going to do about it when a client still doesn’t pay? It is important to keep the lines of communication open with your clients and if payment is still not made, you should then arrange for a letter before action to be sent. This letter states that unless full payment has been made within a set, short time period, proceedings will be issued.
If payment is not made within that period you can review what steps you wish to take. This could be the issue of a claim.
There are two points that are usually discussed when looking at the steps to be taken. The first of these is that do you wish to antagonise a source of possible future work by proceeding? I have found this really answers itself. Do you really want to work for a client who tries to avoid paying? Alternatively, if the client merely seeks to delay payment, pressing it at this stage will send the message that they cannot do this!
The next point is who should do this? I recommend that you should go to a solicitor.
Do you think a further letter from you will have any more affect than the invoice? It is unlikely.
From my experience, debt recovery agencies charge a percentage of the debt. This means that if the client pays on the first “official” letter you pay the same as if they had attended on several occasions. Also, debt recovery agencies cannot act for you on the issue of any proceedings
Solicitors, however, will agree to send out letters before action for a client at a discounted flat rate. You would also not then have the delay of instructing solicitors.
This will speed things up and the faster you get paid the better! Bad debt can be crippling to your business and the sooner you instruct a solicitor to work on your behalf the better for you and your business.
ENDS
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