In the current economic downturn it would seem necessary that all Businesses are efficient in Debt collection from clients on time, but surely this is more serious for a small Company with their own bills to pay, on time. If the client is behind in paying they may feel it best to use a Debt collection agency, which could send out Debt collection letters on their behalf, or the small Company may look for some DIY operation, perhaps from a Business who can give them some Debt collection software that may generate the Debt collection letters for them.
In circumstances where a small Company has insufficient funds to meet its own debts then Debt collection of outstanding invoices from its debtors become crucial in the fight to stay in operation. In many cases the first course of action would be to contact their debtors and remind them of the payment due date, this would usually be a part of the terms and conditions of any contract for the supply of goods or services.
Should this action fail to produce the required payment the small Company may think that they have limited courses of action available with which to chase a bad payer, such as the courts or a choice of Debt collection agencies. The Small Claims Court is limited to claims of £5000 or less and each party must cover their own costs. Higher sums are handled by the County Court or Crown Court and require proper legal representation with attendant costs, where the victor can be awarded their costs to be unpaid invoices without resorting to court, but it is in the best interest of the small Company to ensure that if they go down this route then they engage the services of a fair Debt collection agency for the work, otherwise their own good name may be tainted at the very least if fair Debt collection practices are not used. Fair Debt collection practice includes sending Debt collection letters to the Company owing the money, rather than just sending in the bailiffs right away. Fair Debt collection agencies will most likely offer a no win, no fee service, but you would normally have to speak with them first to know about their fees. The initial contact in itself should be free but the client should investigate the all-in fees before embarking on using the chosen fair Debt collection agency to pursue the debtor for their payment.
However the small Company may not know that they can take direct action themselves, for a small cost that they could get their invoices paid quickly. If they could find out how to do this with the minimum cost and time required from themselves, surely this would be at least worth a try as a first step in trying to recover the debt. There are clearly risks involved in taking this action to Debt collection, not least of which is that a determined non-payer might just treat a letter from the small Company as not worth worrying about and simply ignore it, or possibly worse, phone and make an empty promise of some payment. However, it would seem that any small Company involved in a legitimate line of business would be unlucky to be stuck with a high percentage of bad debtors and so the DIY approach, with the right tools may well bear fruit. Debt collection software could also help in making this method work better for the client, for example in production of tailored Debt collection letters and logging details of what has been done.
The solution would depend on many things, for example the client’s payment history, but the most cost effective method would be the DIY approach to start with, leaving the Debt collection agencies for more troublesome debts perhaps.
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