5 Reasons to Recover an Old Debt

Most businesses that have been operating for five years or more will have experienced several instances of non-5 Reasons to Recover an Old Debtpayment, and if you have not taken action to recover an old debt, here are 5  good reasons to do so.

 


  1. Deadlines – We mention it often in relation to recovering an old debt, but the six-year deadline should always be in your mind when deciding which debts to chase. Prioritise those that are about to become statute-barred, as even just one qualifying interaction with the debtor can reset the clock, allowing you to undertake the rest of your debt recovery action at your leisure.

 

  1. Interest The simple fact is, old debts accrue interest – typically at 8% above the Bank of England’s reference rate – and this is often a much higher rate than you can get on savings and business investments. If there is a good chance of convincing the debtor to pay, going after old debts can be a substantial money-spinner, turning what was once a deduction from your bottom line earnings into a considerable addition.

 

  1. Closure – Unless you formally write them off, old debts can just linger in your company accounts – never paid, but still not statute-barred until the six-year deadline is reached. Chasing an old debt gives you a chance to finally cross it off of your to-do list, so you can stop wondering whether or not you should try to recover money owed to you for several years, and focus on your core business again.

 

  1. Peace of Mind – On a personal level, especially for sole traders, being left out of pocket by a customer you previously trusted can really leave a sting in the tail.When you recover an old debt, you not only achieve the financial and administrative closure mentioned above; you can also reach emotional closure and finally sever all remaining ties with the debtor.

 

  1. Revenge OK, you should never make a business decision purely out of a desire for revenge, but chasing an old debt can be about fairness – getting what you are owed, and making sure the debtor does not fail to pay a supplier in the future. In the first instance you can add interest and penalty fees, plus reasonable debt recovery costs, to maximise the amount you claim, while if a debtor defaults on a really large debt, you may want to petition for their company to be dissolved to prevent any further disruption to your supply chain or industry.

 

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