How can I recover money owed to my company?

The debt collection process so that you are aware of the procedures taken to support your company and recoup any money owed to you.

It’s crucial for your company that you get the payments that your clients and customers owe you.

Customers who try to avoid paying for goods and services can be expensive to your organisation and have negative long-term effects.

You will need to adopt a results-proven debt collection and credit control strategy to recover past-due business debts.

This could involve pursuing payments as soon as possible, working out a payment schedule, or, as a last resort, taking enforcement action.

What should I do when a client doesn’t pay?

When a client doesn’t pay, it’s important to follow a systematic approach. Reach out to the client to politely remind them of the outstanding payment and inquire about the reason for the delay. If the issue persists, you need to do the following:

Chase

It’s typical for invoices to state at the bottom that payments must be made within 30 days. If it turns out that a client hasn’t paid you when you had anticipated, you should start the process of pursuing the invoice. To kindly remind the client that they must pay for the work you have accomplished for them, send extra emails or make phone calls. Otherwise, the problem will only get worse

Credit hold

Stop working for a client until they have paid the balance of their outstanding obligation to you. This is one approach to get a client to pay. Work on an account halts owing to a lack of financing; this is also known as a credit hold or administrative hold.

As a firm might suffer without the services you are giving them, in many circumstances, this is likely to be the solution. You do have other choices, though, if this doesn’t lead to you getting paid.

Final notice

The final notice is the last letter you’ll probably send the customer before court action takes place. This makes clear to them that you’ll wait to take legal action to recover the money you’re owed until they’ve paid off any debts with you, up to a timeframe of your choosing.

You have a number of choices to examine when taking legal action if your client doesn’t make any outstanding payments to your company after receiving this final notification.

Legal action

Legal action against your customer is your final option. Depending on how much your company is owing, you have two options available when this occurs:

1. Mediation

Paying for a mediation service, which involves a qualified individual mediating between you and your debtor, can ultimately save you money. The court will prefer that you try mediation first if you do decide to file court action.

2. Letter Before Action (LBA)

Your solicitor notifies the debtor via a Letter Before Action that you may file a lawsuit against them if they don’t pay by the deadline. If the customer is purposefully being sluggish to pay, this frequently produces quick consequences.

Writing an LBA typically has a significant impact on circumstances involving debt collection. This letter should confirm: This is effectively a last demand letter. It should also include:

• the exact amount of monies are owed
• a clear timeframe (ie 14 days)
• the consequences will be (ie. type of legal action) if they do not pay
• You can also state that any proceedings which follow will also include a claim for Court fees and costs where applicable

3. Debt collection

For sending a solicitors’ letter to the debtor, starting legal action for non-payment, and enforcing a judgement, you can get fixed fees. Should you choose to carry out these actions alone, you have access to the resources, suggestions, instructions, and tools required.

4. Court action and County Court Judgements (CCJs)

The county court, often known as “small claims court,” is where you can file a claim. If the debtor opts to defend themselves, a hearing date in court is scheduled so that the judge can weigh both arguments.

In the event that your consumer chooses to disregard your claim, on the other hand, you might ask for a court order to be made. The court will issue a county court judgement against them if they don’t pay within 28 days. This is a six-year-old judgement, also known as a CCJ, that is taken into account when a debtor applies for credit or other forms of borrowing.

Enforcement measures

You have the right to seek a number of enforcement actions for the debt recovery process to recoup your money if your debtor refuses to pay the judgement debt. 

These might include:

A statutory demand gives the debtor 21 days to make good on their obligations. If this doesn’t happen, you might be able to file a petition to have their business wound up if you owe £750 or more, or to have them declare bankruptcy if you owe £5,000 or more.  All creditors will gain from the sale of your debtor’s assets should a winding-up or bankruptcy order be issued.

Controlled Goods Agreement

Creditors might authorise a bailiff business to recover the debt on their behalf under a controlled goods arrangement. If the debtor doesn’t pay, the bailiffs have the right to seize property, including machinery and cars, and sell it at auction to recoup the debt. Learn more about the agreement for controlled goods.

Charging Order

You may request a charge order to be put on one of the client’s assets in certain situations as the company’s creditor. Typically, land or buildings will be the subject of a charging order. Similar to a mortgage, the asset will be liquidated and the revenues will be given to the debtor to pay off the obligation if the debt is not paid.

Winding-up Petition

If a company disregards or refuses to pay a statutory demand, you as a company creditor have the authority to “wind up” the firm. Only debts exceeding £750 are eligible for use of this authority. If the winding-up petition is successful, the court will issue a winding-up order, which will cause the company’s assets to be liquidated and remove it from the Companies House record.

Frequently asked questions

What are the stages of the debt recovery process?

The stages of the debt recovery process are: Pre-Legal Action (Demand Letter), Issuing Proceedings, Judgement and Enforcement.

Conclusion

In conclusion, implementing a results-proven debt collection and credit control strategy is crucial for businesses to recover past-due debts. By following a systematic approach, including invoicing, chasing payments, credit holds, issuing final notices, and taking legal action when necessary, companies can increase their chances of recouping the money owed to them.

It is important to remember that each situation may require different actions, such as mediation or sending a Letter Before Action, to resolve the debt. By understanding and implementing these debt recovery procedures, businesses can minimise the negative impact of unpaid invoices and safeguard their financial stability.