Business Debt Recovery

It’s all gone a bit techy on this site recently, what with the MS Exchange Alternatives, GMail and the like so I thought I’d do a post which is a bit more business orientated for a change.  Unfortunately, business debt recovery is probably quite apt during these times. I’m fortunate to deal with many businesses but have witnessed over the last few years the demise of some well established companies due to cash flow problems through none payment of their invoices from customers.

Browsing various business forums, it’s clear that its becoming more of a problem and its an awkward subject to deal with – in essence you need to switch from being a good guy to your customer to being firm to demand payment is made.

Many companies use invoice discounting services that allow them to outsource the processes of chasing payments from customers, but whilst this can have short term advantages, the charges that Invoice Discounting costs can mean a good percentage of your profits can be wiped out through the charges.

What do you do when a company owes you money, but either can’t or wont pay?  Assuming there is no on-going dispute over the products or services that have been provided, various options are available to the business who is owed the money.

Final Demand

First of all, a business should make all necessary efforts to deal with the company who owes them money on reasonable terms. Should this fail, then a final demand for payment should be sent to the debtor, indicating that this is their final chance to pay, or at least make an effort to reduce the debt in the form of an instalment payment plan.

 

Court

Should the final demand for payment be ignored, then the next option is to take the debtor to court over the unpaid bills. There are 2 options; the small claims court for amounts outstanding that are less than £5000.00, or the fast track court for larger debts.

 

Small Claim

The small claim court offers a simple, relatively cheap and quick method of taking a company to court for non payment of invoices. You must be able to show that the debt is real, and that the products or services have been provided.  A decision can be made  within a few weeks if the debtor doesnt make a defence.

Often, the threat of court action can spur the debtor into paying the outstanding bill.

Money Claim Online offers a simple online process for issuing proceedings to recover the debt through the small claims court.

Fast Track

Where the amount in dispute is greater than £5000, the Fast Track Court process is usually followed. This is a more complicated and costly process – if you feel you need to follow this route, it would be advisable to seek professional advice first.

 

Winding up Order

This is a sledge hammer approach – if the debt is undisputed, you take take a legal process which involves requesting a judge to “wind up” the company to gain payment.  This is a very powerful approach as it means that if the debt remains unpaid, the company will be closed down and its assets sold to pay the debts.

 

Preventing debt

Of course, it’s always better to prevent a debt building up from a company in the first place. There are various ways of doing this which I’ll deal with in another post.

 

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  1. [...] a previous post I looked at a few options for dealing with business debt recovery. But, given the option, [...]

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