In the recent economic situation it would seem most important that all Entities are efficient in Debt collection from clients on time, but surely this is more serious for a small Company with their own bills to pay, on time. If the client is behind in paying they may feel it best to use a Debt collection agency, which could send out Debt collection letters on their behalf, or the small Company may look for some DIY process, perhaps from a Organisation who can give them some Debt collection software that may print the Debt collection letters for them.
In periods where a small Company has insufficient funds to meet its own outstanding payments then Debt collection of overdue invoices from its debtors become most important in the fight to stay in operation. In many cases the first course of action would be to contact their debtors and remind them of the invoice due date, this would usually be a part of the terms and conditions of any contract for the supply of goods or services.
Should this action fail to produce the required results the small Company may think that they have limited courses of action available with which to chase a bad payer, such as the courts or a choice of Debt collection agencies. The Small Claims Court is limited to claims of ?5000 or less and each party must cover their own costs. Higher sums are handled by the County Court or Crown Court and require proper legal representation with attendant costs, where the victor can be awarded their costs to be monies due without resorting to court, but it is in the best interest of the small Company to ensure that if they take this line then they take on the services of a fair Debt collection agency for the work, otherwise their own business standing may be damaged at the very least if fair Debt collection practices are not used. Fair Debt collection practice includes posting Debt collection letters to the Company owing the money, rather than just sending in the bailiffs right away. Fair Debt collection agencies will most likely offer a no win, no fee service, but you would normally have to speak with them first to know about their fees. The initial contact in itself should be free but the client should find out about the all-in fees before deciding on using the selected fair Debt collection agency to pursue the debtor for their payment.
However the small Company may be unaware that they can take direct action themselves, for a small charge that they could get their accounts paid quickly. If they could be informed how to do this with the minimum charge and time required from themselves, surely this would be at least worth a try as a first step in trying to recover the debt. There are clearly risks involved in taking this approach to Debt collection, not least of which is that a experienced non-payer might just take a letter from the small Company as not worth worrying about and simply ignore it, or possibly worse, phone and make an empty promise of some payment. However, it would seem that any small Company involved in a legitimate business would be unfortunate to encounter a high percentage of bad debtors and so the DIY approach, with the right tools may well win out. Debt collection software could also assist in making this method work better for the client, for example in production of tailored Debt collection letters and logging details of what has happened.
The solution would depend on many things, for example the client’s payment history, but the most cost effective method would be the DIY approach to start with, leaving the Debt collection agencies for more troublesome debts perhaps.
