Top 5 tips for recovering debts
We’ve shared 5 of our top tips for making sure you recover any money owed to you.
- Have all the facts
The first and most important step towards putting an effective debt recovery process in place is to make sure you have accurate and up-to-date information to hand.
This includes keeping copies – on paper or electronically – of all credit applications, contracts and terms and conditions and always keep copies of any communications between you and your customer as a precautionary measure. This is especially crucial given the Pre-Action Protocol for Debt Claims which requires you to provide all of this documentation along with any statements and invoices at the outset of a debt recovery action. It’ll also help you avoid issues further down the line should your initial efforts prove fruitless.
- Send a reminder … and keep a copy
If you find a customer account is overdue, send a gentle reminder with a recommended 7 day deadline. Alternatively if the debt relates to an individual (including sole traders) you can send a 30 day notice in accordance with the Pre-Action Protocol for Debt Claims.
If you need to pass the account to your legal team or legal advisers once that payment date on your reminder passes, a record of this notice will be a mandatory requirement; all pre-action correspondence has to include all the required documentation which in turn emphasises the importance of the message set out in step 1.
Further information on this may be found here. This page outlines the requirements placed upon creditors – including copies of all accompanying documentation – that must be provided with your correspondence.
- Keep it real!
So you have all your documentation and you’ve sent your gentle reminder that payment is overdue, but what do you do if the debtor replies complaining of having financial issues or if you’ve found out they are in financial difficulties?
When discussing this with the debtor, remember realism is the key.
If you are entering an instalment plan for example, make sure this is set at a level which is both affordable and acceptable to you and the debtor to minimise the risk of your debtor defaulting.
- Keep your instructions clear and concise
When you are negotiating repayment or any other means of collection with a debtor make sure your instructions are clear and concise. Outline the terms of your proposed arrangement and your expectations clearly in writing for the avoidance of doubt. You may also want to add additional terms demanding the balance is repaid more quickly should their financial situation improve during the agreement period.
Also, during the term of the agreement, continue to monitor the financial health of the debtor business (if it is indeed a business) for any potential issues – e.g. Winding Up petitions or sudden financial changes – which may indicate a negative outlook.
The faster you react, the faster any preventative action can be taken to avoid unnecessary write offs.
- Set any agreement out in writing
As we’ve already said should you come to an agreement with your debtor, ensure it is formalised in writing even if you’ve agreed it verbally to avoid a ‘he said, she said’ situation arising further down the line.
Make sure your written agreement includes information such as payment dates, amounts and any other terms discussed between yourself and the debtor. Where possible, ensure the debtor signs the arrangement or signals his agreement to it by way of a written response.
In addition, make sure your agreement confirms the consequences of breaching it. For example, you would consider any breach such as a missed payment as a termination of the agreement after which you will be free to commence formal legal proceedings immediately and without further notice. This will ensure any delays are avoided should legal action become necessary.
In conclusion, it is often said that knowledge is power and this is very true! However, knowledge comes from having accurate, up to date information, from monitoring your debtors for any signs of a negative response and from having written agreements wherever possible.
And if all else fails, please call the Debt Recovery team at Keebles on 0113 399 3482 or email Charise Marsden at firstname.lastname@example.org