Overdue debts are a credit control headache, as you try to work out the best way to get customers to pay what they owe, without harming your own bottom line or business reputation.
A subtle approach often works best – after all, few companies want it to become public knowledge that they don’t pay their debts, and you might not want to publicise the fact that you take swift enforcement action against late payment either.
However, what about when this doesn’t work? Should you take the chase to the next level?
The answer depends on the debt, along with a couple of other specific circumstances that might apply to your situation.
For very small debts, it might be quickest, easiest, and least stressful simply to write off the debt, blacklist the customer, and get on with your business life.
Business shouldn’t be personal, but you might still want to make a point by taking the debtor to court, if only to prevent them from continuing their poor payment practices in the future.
Think carefully before you do this though – you might prevent them from running up bad debts with future suppliers, but even if you recover all of your costs from the debtor, it will still take a chunk of your time to enforce the debt in this way.
However, it doesn’t take much of a debt before it starts to become well worth taking action, even as a purely financial decision.
Remember, these days you can claim back reasonable debt recovery costs from the debtor, so it shouldn’t cost you anything to call in a professional debt collector.
You can also add statutory interest to the debt and, although the base rate is still very low, you’ll probably find you get more back on a bad debt than you can find on any standard savings account out there at the moment.
The older the debt, the more interest you can charge – so if you have an aged debt outstanding since the early days of the recession, take a fresh look at how much it might be worth now.
If you have had the debt acknowledged by the debtor within the past six years, it should still be legal to chase them for payment (which unfortunately means some debts from the very start of the 2007-08 credit crunch may have expired).
Unless the statute of limitations applies in this way though, historic debts are very much worth considering to chase anew – the results could have a big, big impact on your bottom line as we emerge from the economic downturn.
If you would like further information or would like to talk to a member of our team about effective debt collection please call 0808 163 7967