We are all in business to be paid, whether that is a professional services firm like ours or you are manufacturing widgets.  When customers engage, they expect to have to pay for your services or goods and when you have robust credit control procedures you would hope they would pay within your credit terms.

Unfortunately, this does not always happen and you need to move quickly to protect your position and ensure you get paid. More often than not, you will be one of many creditors pursuing payment and those who shout loudest often get paid first.

The trick then becomes distinguishing between the ‘can pay but won’t pay’ debtors and the genuinely ‘can’t pay’ debtors.  Needless to say, both require different approaches that safeguard the interests of your own business. 

Where debtors simply cannot pay, you enjoy a good relationship with them and you trust them, then aggressive debt recovery is unlikely to be the solution. Our Stakeholder Support Service encourages positive engagement with distressed customers and suppliers.  Where necessary, you should pro-actively point them in the direction of your own trusted advisers to safeguard your business interests.

Where a debtor can pay but won’t, this is a behaviour you should not tolerate as it has a direct and detrimental impact on your cash flow.

What are the next steps?

If you have already escalated the recovery of your debt via your own credit control process without success you need to engage with experienced and qualified debt recovery solicitors.  It will often be the case that you can recover your costs which will likely be a lot lower than you thought.

The effect of a solicitor’s letter can be dramatic and effective.

We have developed strong relationships with debt recovery firms over many years and can work with you to ensure the best possible firm is chosen that is suitable for your business and for recovery of your debts.  This can range from firms that have expertise in pursuing large volumes of debts and ones that can deal with complex contractual disputes.

What are the advantages of engaging a debt recovery firm?

The best way to demonstrate this is to give you real life examples:

Example 1: an independent finance company seeking payment for overdue invoices

One of our panel solicitors acted on behalf of an independent finance company against a large construction company for payment of overdue invoices. Court proceedings were raised to include interest and compensation under The Late Payment of Commercial Debts (Interest) Act 1998 Act. A decree was obtained. The debtors arranged payment of full sums outstanding to include expenses, interest and compensation.  The principal sum paid was £14,024.06, the interest recovered was £350.61, the compensation paid was £250 and the debtor settled full judicial expenses which covered the legal costs.  This case was dealt with in a three-month period from point of instruction through to settlement.

Example 2: Small timber merchant seeking payment for overdue invoices

Another example is when one of our panel solicitors acted on behalf of a small timber and building merchant company against a sole trader.  Court proceedings were raised to include interest and compensation under The Late Payment of Commercial Debts (Interest) Act 1998 Act.   A decree was obtained.  A bank arrestment was served and was successful in attaching funds to clear the value of the arrestment served.  The principal sum paid was £449.60, the interest recovered was £67.89, the compensation paid was £40 and the debtor settled full judicial expenses.  

Example 3: An energy supplier seeking payment for overdue invoices

One of our panel solicitors acting on behalf of an Energy supplier against a medium sized Company in the leisure industry.  The customer continued to use the services of the client, the sums outstanding therefore continued to accrue.  Court proceedings were raised and Decree obtained for the sum of £44015.12 plus interest and judicial expenses.  A Charge for Payment of Money followed by a Winding up Petition was issued to Court appointing an insolvency practitioner on a provisional basis.  The Company arranged full settlement of all sums due to include on-going charges along with interest in the sum of £1179.55 and legal expenses. 

In one case where Johnston Carmichael were appointed provisional liquidator following a process similar to the last example, the client was paid in full and the debtor company entered receivership 2 weeks later.

Those who shout loudest get paid first.  Fact!

Got a question?

If you feel you’d benefit from some assistance with debt recovery, please get in touch with me or another member of the Restructuring team for an initial chat.