Debt recovery Process FAQs:
Effective credit control and having your invoices paid on time is a vital aspect of running a business. Unpaid debts hinder the efficient running of your business, affecting cash flow, creating uncertainty and potentially could delay payments to either your staff or your creditors, which could damage your reputation.
This week we give an overview of some of the main invoice and debt recovery stages, helping you to understand the steps you can put in place to ensure you protect your business and where possible, recover any monies you are owed. This is not intended as legal advice, but as general guidance covering some of the most common terms and processes used when you have a dispute over an unpaid invoice.
Here are some of the main stages to effective credit control and debt recovery:
- Invoice as normal – The first stage to any effective credit control will be your invoice process and terms of business. Invoice your client with clear payment instructions. Both parties should have already agreed on payment terms, and expected costs, so at this point, you should wait for confirmation that you have received payment and within the agreed timeframe.
- Chase – In the event of any late invoice payments, you should begin a process of chasing up the invoice – credit control procedures. Sometimes a gentle reminder maybe all it requires and it can assist with future client relations. This can be via a phone call, an email with copy of the invoice attached, or letter, reminding the client of the invoice terms and that payment is overdue – You can normally determine at this point, their intentions of when payment will be made, if any.
- Credit hold – If further work is required, you could consider stopping any additional work, service provision, or supply of goods for example, for the client until funds have been paid.
- Letter before action/final notice? – A Letter Before Action, or Final notice, provides information regarding your intentions should the invoice continue to go unpaid, you should confirm an amount of time you will wait for funds to be expected, and confirm what your intentions will be should the invoice continue to go unpaid, such as seeking legal advice and intention to pursue the debt via other means, such as via the courts for example.
- Entering dispute resolution process or issuing a Claim form or Statutory demand – If your debtor responds with an offer to pay part of the debt or requests longer to pay, this could open up a possibility to negotiate the debt owed and to find an arrangement without the need to issue a claim through the courts. However, if your debtor does not respond, or if they respond disputing the debt, you should seek the advice of a debt recovery specialist who will be able to assess your case and your chances of success. They will be able to offer the most appropriate solution depending on the size of the debt and the circumstances. There will be different alternative dispute resolution options available to you, before going straight to court and it will be advisable to try and settle debt disputes outside of the court process if possible.
- Issuing proceedings and enforcement – If you are unable to reach an agreement regarding the debt, if the debt is disputed, or if you have not heard from your debtor, the next step would be to issue court proceedings by sending a claim form and particulars of claim to the court. Once the court provides a claim number, the documents would be served on the debtor, giving them 14 days to respond.
- Disputed Debts, Defence and Directions questionnaires – If your debtor responds with a dispute to the claim, they will be given another 14 days to file their defence. You and the other party will be asked to complete a directions questionnaire, which will be reviewed by the courts, which will subsequently set a timetable for the next steps to be followed. Both parties will be expected to disclose any relevant documents and details of witness and expert evidence. If agreed by both parties, a request can be made to pause the proceedings for one month, in order to try and resolve the dispute and negotiate a solution.
- Final hearing – If no agreement has been reached before this stage, a final hearing will be held at which a judge considers all the evidence, decides the outcome and makes an order, including for costs and interest.
- County Court Judgments (CCJs) – If no response is received from the debtor at the point of issuing a claim, judgment against them can be entered in the form of a County Court Judgment (CCJ). You can decide if you want the court to take further action to collect your payment and there are various methods of enforcement of a CCJ, if the debt remains unpaid, including:
- Send bailiffs to collect payment
- Have money deducted from wages
- Freeze assets or money in an account
- Charge the debtor’s land or property
- If you are owned money from a business, you can apply to the court to make a winding-up petition to close or ‘wind-up’ the company. Company assets will be sold and any surplus funds are paid to you and any other creditors
Debt Recovery – How Larcomes Solicitors can help
At Larcomes solicitors, our specialist Debt Recovery and Enforcement solicitors in Portsmouth and Waterlooville have the knowledge and expertise to help. We will explain all the options available to you, ensure you are aware of the costs involved, and guide you through every step of the debt recovery process, from the very first stages, right through to ensuring you collect the debt owed to you.
Our debt recovery expertise covers all areas of commercial and private debt, debt collection and enforcement for both individuals and businesses and we are confident we can help you resolve your debt dispute. To speak with one of our specialist Debt Recovery team, Please call on 023 9244 8100 or make an online enquiry for a no obligation assessment of your case.
Please note that this article is not intended as legal or professional advice, it is for general guidance only and updates to the law may have changed since it was published.