Start the new tax year with better debt recovery processes
The new tax year began on 6th April 2022, and while you may not have made any ‘new year, new you’ promises, perhaps it could be time to sort out your business finances.
It can be easy to let things slip – a late invoice, a missed payment and even an unpaying customer or client. However, when all of these add up, it can have a catastrophic effect on your cash flow and the longevity of your business. This article looks at simple steps you can take to improve your debt recovery processes.
Have a debt recovery process in place
We see many businesses that simply do not have a process in place. When clients fail to pay, they are chased by email or by telephone, but it never really goes any further. Having a formal debt recovery process in place – and team members responsible for following that process – can greatly improve your business practices and profitability.
Take action right away
When you have a proper debt recovery process in place, the person responsible for chasing debt should act promptly when payments are late. Failure to act swiftly can let debts mount up, making it more difficult for clients to settle their full balance. Similarly, when you don’t take prompt action, clients are more likely to make a habit of late payment.
Sending a physical letter to unpaying customers or clients lets them know you are serious and escalates the situation whilst keeping it within your control. The letter should be firm but fair – offering the client options for payment or a way to discuss the outstanding debt with your business.
Partner with a firm of debt recovery solicitors
What can you do if a client simply won’t pay? While no one wants to damage a business relationship, a non-paying client is not helping your business, and it may be time to get the help of a firm of debt recovery lawyers.
Debt recovery lawyers don’t just take court action, but can send letters on your behalf. Letters from a solicitor often prompt debtors into paying as they worry that you might be considering further action. Of course, you may need to take court action where a debtor refuses to make payment or come to an agreement with you.
A debt recovery solicitor will be able to look at all the circumstances of your case and advise you on the likelihood of recovering what is owed to you. They will also be able to advise on the best course of action and present your case in court if necessary. While you may be concerned about how much the assistance of a solicitor may cost, not getting paid what you are owed could cost you much more.
Esther Marshall, Senior Associate in our Dispute Resolution Team, said:
“Letting debt escalate can have devastating effects on cashflow, therefore it’s never too early to consider your options where you have non paying customers.”