10 Steps to Take to Recover a Debt More Successfully
Introduction
Running a business is a demanding job, and when you rely on your clients to make their payments on time, then it can be stressful when they don't. Debt recovery is ever increasing in its demand as more businesses and individuals find themselves in difficulty, and this can be a positive step when your debtors actively engage and agree to repayment terms that work for everyone.
Sadly, there are many debtors that avoid repayments and go out of their way to stop you from contacting them in the hope that the debt will disappear.
If you are struggling with getting your debtors to pay up, then we have ten steps that you can take to help you recover your debts more successfully.
Struggling with unpaid debts? Start recovering what's owed to you today.
1 – Make Sure Your Services Are Well Organised and Ask for the Right Information
If you are in the business you will need to ensure that all your policies and processes are correctly geared up for success. Failing to do this will not only make it easier for a person to evade you when it comes to repayment but will also give your debtor the chance to claim that they were unaware of your terms and conditions when you take action against them.
Firstly, ensure that you have all the right contact details for your prospective client and check them for inaccuracies – getting this right may help you when it comes to chasing debt at a later date. Next, you need to ensure that your client passes all the required checks so that if there are issues in the future, then you will not lose out because you failed to do your pre-checks properly.
Ultimately, knowing your customer in as much detail as possible will help you to avoid debt recovery problems further down the line.
2 – Have Clear Terms and Conditions and Ensure Clients Read Them
Whenever you start a new business relationship, it is vital that you share your terms and conditions so that payment terms and any other requirements are clearly seen and agreed to. Doing this helps you to set your expectations of the working relationship and lets your clients know what will happen if they fail to adhere to the terms you have shared.
Don't be tempted to just mail a copy of your terms and conditions and leave it there as if you ever need to issue proceedings, you will need to show that the client knew what they agreed to. Therefore, getting signed terms and conditions should be a non-negotiable part of your deal, with services not being released until they have been agreed, signed and returned.
3 – Have a Clear Procedure and Follow it Properly
Ensuring you have a procedure in place for late and non-payments is an essential step in recovering your debt. This does not mean constantly reminding clients that they owe you money but having a process to follow should they ever default.
Start by issuing a reminder when the payment is late and then a payment demand if a 10 day period passes without any contact. It is also advisable to follow up letters/emails/texts with a phone call as this will help you solve simple issues with forgotten payments and also identify when there are further problems that need to be addressed in order to recover the missed payments.
If your efforts do not resolve the issue, then you will need to start debt recovery proceedings.
4 – Look Out for Warning Signs
One of the main things that business owners share with us at DebtTrace is that they could have noticed the warning signs earlier.
Think about clients that always pay late multiple times from the same company. If you find that you have a client that fits this, then it is worth proactively managing them so that you don't end up out of pocket.
5 - Keep Accurate Records and Save All Correspondence
When you start debt recovery proceedings and are considering legal action, then you will need to have records of every interaction available so that you can prove that you acted responsibly and fairly for the duration of the contract to date.
This means retaining all correspondence sent between you and the client so that you can prove you behaved reasonably and within the law.
Many companies end up having to wipe off debts where there has been poor record-keeping as the burden of proof lies with you as the creditor.
6 - Make Sure You Have Up to Date Details for Your Client
Once you are in debt recovery mode, you will need to make sure that you have the most up to date contact details for your client to be able to proceed. Many businesses and individuals move multiple times during the “customer lifecycle” and if you don't have their current address or contact details when they fall into debt with you, then you will not be able to issue any proceedings against them,
Rather than wasting your time trying to find them, let DebtTrace help. Our debtor tracing service works in compliance with GDPR to find you the right contact details for your clients. Plus, we offer a money-back guarantee if we can't find your client within seven days*
7 – Consider Mediation
When your recovery moves from a late or missed payment to an ongoing refusal to pay a debt, then you will need to consider all your options before you move forward with recovery. One way to potentially avoid expensive debt recovery litigation is to consider mediation with a financial mediator.
A mediation service will work with you and your client to come to an agreement over the outstanding debt and agree on actions that will be taken to avoid legal proceedings. The great thing about using a mediator is that they are highly skilled in achieving outcomes that work for both parties.
8 - Consider Settling for Less
If your recovery efforts are not bearing fruit, then it may be time to consider a different path. Many businesses work hard to collect money, but when it seems like you have tried everything unsuccessfully, then you may consider writing off the debt or settling for a lesser amount.
However, before you decide to cut your losses and move on, it may be worth offering your client a settlement where they pay less than is owed to clear the total outstanding debt. Deciding to do this should be one of the last resorts as you will be left out of pocket, but if nothing else works, then it may be a good way to get some money back.
9 – Issue a Letter Before Action Warning
If mediation did not work or if your client refused to take part, then issuing a Letter Before Action Warning (LBA) will be another option to give them a clear message that you will proceed to action if they fail to work with you to clear their debt.
LBAs state how much the client owes you, how long they have to respond to the LBA (usually 14 days), what will happen if they fail to pay or arrange a repayment plan and the fees that will be incurred if you need to pass the debt on for further recovery / Litigation. LBAs have a high success rate and will often get a client to contact you to agree on a way forward, helping you to keep your litigation recovery costs low whilst still getting the payments you are owed.
10 - Hire a Debt Collection Agent
If all your hard work is not paying off, then it may be worth hiring a specialist debt collection service that will work to recover your money on your behalf. You will need to share everything you have done with the client and all the documentation you have issued so that the appointed debt recovery agent can then proceed in the best possible way.
Most agencies in the UK work on a contingent basis meaning you will only pay on successful recovery but make sure to check this before instructing them.
This article you may find useful on how to issue a Money claim using the small claims procedure.
Get in Touch with DebtTrace
If you are at the starting point of debt recovery and need access to addresses for your clients, then DebtTrace is here to help.
Struggling with unpaid debts? Start recovering what's owed to you today.
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