How to recover company debts and put an end to non-payers

Do you have late payers that you want to prevent turning into non-payers? Here’s our guide to the processes you can use to recover company debts.

There has been more than enough said over the last few years about just how damaging late payments can be for SMEs.

But there’s a big difference between late payers and non-payers. While late payers intend to pay for the products or services you have supplied eventually, non-payers have no intention of paying at all. While you might think this kind of bad debt is actually quite rare here in the UK, research by Direct Line for Business has found that SMEs wrote off a total of £5.8bn of debt in the last financial year alone.

Why are SMEs seemingly so willing to write-off bad debts?

Clearly every business would be reluctant to let a customer get away with a product or service without paying, so why are the levels of debt being written-off by SMEs so high? According to the research, 29% of respondents said the supplier had become insolvent and was therefore unable to pay the debt.

Other reasons cited for companies choosing to write-off debts include:

• A reluctance to rock the boat with customers and damage existing relationships;
• Thinking the supplier would not have sufficient funds to pay the debt;
• Being unclear about the proper channels for pursuing the payment of the money owed.

While the reasons for failing to chase debts are understandable, the consequences of bad debts can be extremely severe for British businesses. Nick Breton, head of Direct Line for Business, said: “All of these debts add up and with nearly 7,000 companies estimated to have entered liquidation in the first half of 2016 alone, the potentially disastrous knock-on effects of writing off money owed are clear.”

The first step in recovering company debts

The fact is that a customer who is not willing to pay, should be made to pay. If there are no disputes about the quality of the work delivered, and the customer has not become insolvent, then there is absolutely no reason not to chase them for payment.

Clear payment terms in the first instance are essential and they should set out the consequences of late payments. This includes:

o    The suspension of credit terms and/or supplies

o    Referral to a third party debt recovery company

o    Recovery of statutory costs and late payment interest

o    The legal action you will take

Chasing late payers

Once it becomes clear that a payment is not going to be made on time, here’s what you should you do:

• If your customers are regularly allowed to pay late it will be more difficult to insist that payments are made on time. It must be clear from the outset that you expect payments to be made by the due date.
• If payments are overdue and the customer is ignoring your requests for payment, seriously consider stopping the supply of goods and services. The customer has to know that there will be consequences for their actions. Even if this doesn’t prompt the payment to made, at least it will prevent the debt from escalating.
• Chasing overdue debts requires commitment. You need to put proper procedures in place for making demands for the payment of an unpaid debt, whether they’re paper-based, by email or over the phone.
• If the customer admits they are experiencing cash-flow problems then try to agree a sensible weekly or monthly payment plan for the debt to be repaid.
• Consider employing a third party debt collection firm to pursue the debt. This can often lead to a positive result being achieved.
• If customers still fail to pay their debts, you should then consider taking legal action to enforce the debt. There are a range of different types of action you can take to enforce the debt. This includes: county court proceedings; controlled goods agreements; statutory demands; winding up petitions and more.

If you have money owed to your company & need it recovered for you, companies like HJS Recovery can help you get your unpaid money from debtors.