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//Prompt Action Reduces Debts

Prompt Action Reduces Debts

Effective credit control recovery systems are essential to ensure low levels of uncollected debt and good cash flow. From our experience in debt recovery we set out the most important steps to obtain payment.

High levels of uncollected debts can have a devastating effect on your business. It is vital to have an effective system in place for payment of invoices and recovery of debts to relieve cash flow and associated difficulties.

An internal, organised credit control system for seeking payment of invoices by businesses drastically reduces the amount of unpaid overdue invoices which arise. Common steps in such systems which your business should employ include:-

  1. Diary invoice payment dates and send a timely reminder immediately;
  2. If payment has not been made within seven days, telephone the customer to request payment by a specified date, diary and review on that date;
  3. Send one more reminder requesting payment by a specified date, diary and review;
  4. If payment is not made, notify the customer in writing of your intention to refer the matter for legal proceedings by a specified date. Diary and review; and
  5. If payment is still not forthcoming contact your solicitor to commence action.

If you become aware that the customer is experiencing financial difficulties at any earlier stage of this process consult your solicitor immediately.

Our experience is that the prospect of recovery is greatly improved if debts are pursued promptly by solicitors at an early stage. Our tried and tested approach to the recovery process optimises results and payment early on in the process.

The greatest yield in legal recovery occurs pre-judgment so it is vital that we take action and start the recovery process without delay. The most cost-efficient way to instruct us in recovery of debts is to provide all the information in one communication. This includes:-

  1. Customer name;
  2. Customer type (sole trader, partnership or company);
  3. Copy invoices;
  4. Notes and copies of any correspondence and communications regarding the account; and
  5. Any known details of the customer’s financial situation.

A demand letter is issued straight away which often results in payment or negotiation of a payment schedule with the debtor.

Judgment can be obtained if payment is not made or if payment schedules are not adhered to. Enforcement remedies can be pursued if necessary. We provide directional advice regarding the most appropriate enforcement method at that stage.

What are the advantages of engaging a solicitor?

  1. Customers will take the formal threat of legal action from a solicitor seriously and it is often enough to obtain payment;
  2. The debtor is put on notice of the additional costs of legal proceedings, which is a strong incentive to pay before proceedings go further; and
  3. Recovery is even more likely once formal legal proceedings are served.

An organised internal credit control system within a business for reviewing payment of invoices and seeking payment promptly is vital to ensure a healthy cashflow and to keep debts to a minimum. Swift action through your solicitor is often effective to ensure recovery of more stubborn debts.

2018-12-13T12:04:23+01:00December 12th, 2018|Publications|

About the Author:

Jacci Fox manages the Debt and Asset Recovery Unit and joined the firm in 1988. She has extensive experience and expertise in all aspects of debt recovery, ranging from district […]

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