There are lots of frequently asked questions where debt recovery is concerned – and the list below is by no means exhaustive.
However, we’ve picked out just a few of what we consider to be the most important questions we receive on a regular basis.
Will debt recovery alienate my customers?
Anyone who doesn’t pay you what they owe is a debtor, not a customer – and you should think carefully about whether it is worth dealing with them again in the future anyway.
For all of your good customers, who pay on time anyway, the fact that you’re chasing non-payers shouldn’t come as any cause for concern because, after all, if they keep paying on time, you’ll never need to chase them.
Customers will want to do business with a stable supplier, so the health of your cash flow is an important factor in this – being seen to take action on unpaid debts, if anything, sends a positive message that you’re not going to fail to fulfil an order due to cash flow problems of your own.
When should I compromise?
In some cases even if you win a court order, you’ll still have to wait to be paid in instalments, and if the debtor goes bankrupt, you might lose everything anyway.
Be realistic about what you will be able to recover from a non-paying debtor – if you’re expecting to lose the lot, and they offer to pay back half of what they owe, it might be time to cut your losses and simply say OK.
What puts more power in my hands?
A customer who wants to continue doing business with you will be more likely to pay up, especially if you cut them off (or threaten to do so), although similarly you might be more likely to be lenient if they’ve always paid on time in the past.
Depending on the size of the debt, you might also be able to petition for insolvency or bankruptcy – and some debtors will pay very quickly if this seems likely.
You should also strongly consider having a set of terms and conditions drawn up, outlining your rights to retain ownership of anything that’s not paid for, and so on – make sure you give these to the customer from the outset, and not simply as a footnote to your invoice.
Can I charge interest?
Yes, you can. In most cases of overdue debts, you can charge statutory interest at 8% above the Bank of England reference rate, a fixed penalty of £40, £70 or £100 depending on the amount owed, and any additional debt recovery costs you incur chasing for payment.
In practice though, it’s quite rare to actually receive these extra amounts – what they can do is to send a clear message that the amount owed is climbing, and this may trigger the debtor to settle the original invoice and hope you will simply waive the interest and fees.
You probably should do so, if the threat of interest has led to full payment of the original amount – it’s not a bad result – and generally only expect to be paid the interest on very large debts that need court action to recover.
If you would like to talk to a member of our team further about Debt Recovery, don’t hesitate to call on 0808 256 5053.