As a business owner, it is likely that at some point in your career you will come across a customer refusing, or being unable to pay for your goods or services.
Chasing payments for overdue invoices can drain your energy and time away from running your business. Small businesses seeking debt recovery is becoming all too common practice for business owners, with many reaching out for help when they have received little to no communication regarding payment of their invoices.
Always remember that dealing with customers also involves good judgment and if you have a five-year relationship with a client and suddenly they don’t pay, then take the time to understand what is going on before jumping in with payment demands.
In most cases, if you haven’t been paid on a late invoice then you do need to act swiftly. In this blog post, we’ll talk you through the commercial debt recovery process and the options available to you through using Creditsafe.
Before you begin to recover an unpaid invoice
Incorrect information on an invoice can cause dispute and delays during recovery.
If you do proceed to court recovery then you will need to prove that you followed a fair process so keep a record of all correspondence.
Reminder letters
If you have sent your invoice and not received payment past the due date, you can start your debt recovery process by sending reminder letters. This can be something you setup manually in-house or through using Creditsafe.
The reminder letters can be staggered at the beginning, depending on how urgently you need your invoice to be paid. You should preferably leave a week in between correspondence for the client to respond, however, if you continue to hear nothing back and have not received payment, you can send the letters more frequently.
Keep a record of your communication efforts as evidence and try different avenues, such as email, post, and telephone. Make sure to date the letters, and reiterate your payment methods and details, as well as your contact numbers for them to get in touch with you directly if they have any issues.
You're legally entitled to issue statutory interest rates the day the payment is late. This is if you haven't already agreed when the fee will be paid with the customer. If you didn't have an agreed payment term, the law has set a default period of 30 days before you can charge daily interest. You can also claim debt recovery costs with the amount you can charge based on the amount of the overdue invoice.
If you have sent continuous reminder letters with a matter of urgency and still aren’t getting anywhere, it’s time to get a third party involved to help chase your debt for you.
A debt collection firm
As a last resort, a debt recovery firm is one of the options you have when trying to recover a debt. Depending on your budget and how much time you have, this could be the best route. If you choose to instruct a reputable debt recovery firm they will charge a fixed percentage of the debt once it’s recovered. If they are unsuccessful they should be able to advise you if further legal action is a viable way to recover your money. There are usually no upfront costs to instructing an agency to chase the money for you and they can normally begin action immediately.
Debt recovery firms are experts at what they do, and most work on a ‘no-win, no-fee' basis so you will only pay if your debt is recovered. This is a viable way if you need your debt recovered quickly and don't want to pay anything upfront.
If you do approach a third party to recover the debt remember:
- Only employ a reputable firm as they are representing your name and brand.
- Ask for references and follow them up.
- Only agree a no-collection-no-fee basis.
- Ask for their terms and conditions.
- Only use an agency that is registered with the Financial Conduct Authority.
- Do not employ anyone where you suspect a use of ‘heavy tactics’.
Debt recovery firms are experts at what they do, and most work on a ‘no-win, no-fee' basis so you will only pay if your debt is recovered. This is a viable way if you need your debt recovered quickly and don't want to pay anything upfront
Need help or advice on debt recovery?
Our online Help Hub is home to our product user guides, FAQs and video overviews so that you always have immediate access to product information when you need it.
You can also submit a question to our Customer Support team via our Help Hub. The majority of our queries are resolved the very same day.
Alternatively, why not reach out to your Account Manager for additional support and advice, or schedule a personalised training session with our dedicated Training team.
- Request a call back from your account manager.
- Schedule a personalised training session.
- Visit our online Help Hub.