How to recover debts

Cash is king is what our accountants tell us but in difficult times what if customers can't pay - or won't pay.  Here are some useful tips to help you improve your chances of getting paid.

Be a pain

An efficient credit control system will go a long way.  Be sure to systematically chase non payers and stick to any deadlines that you set to maintain credibility. When it comes to debt collection, the squeaky wheel is the one that gets paid first.

Threaten to sue

Before you sue, threaten to sue.  Send out a letter before action, before proceedings are issued.  The letter should clearly set out the details of the debt and clear deadline for payment (or proposals for payment).  It is important to show you mean business but advisable to offer an olive branch to well meaning debtors who are simply suffering cash flow problems.

The letter should make clear that the county court proceedings or a statutory demand will follow if a response is not forthcoming.  However, if you talk the talk, be ready to walk the walk.  If you promise to initiate legal proceedings on a specific date, do so.

Issuing proceedings

The final step if a letter before action is not successful.  Alternatively, it may be appropriate to serve a statutory demand on the debtor. This is the first step in issuing a bankruptcy petition against an individual, or a winding up order if the debtor is a limited company and can be a powerful weapon.

Before issuing proceedings carefully consider the likelihood of getting your money in the event your claim is successful.  Does the debtor own any assets?  Do they have a regular income?  A county court judgment is not a guarantee of payment.  It is only worth proceeding if the debtor has money or assets you can enforce your judgment against, otherwise you risk throwing good money after bad.

The court fee payable will depend on the value of the debt.  For example - £65 for a debt of £500 to £1,000 and £225 for debts of £5,000 to £15,000. The fee is recoverable if your claim is successful. Claims of under £5,000 will be dealt with by the small claims court and can be issued online at www.moneyclaim.gov.uk.

Once proceedings are issued the debtor will have 14 days to file a defence.  If the debtor fails to respond you should be entitled to default judgment without a hearing.  If the debtor defends the claim it will generally take up to 3 months for the case to reach court.

Next time we'll look at enforcement but in the meantime, happy hunting.

For more information or specific advice please contact Simon Sanger-Anderson at Tozers on 01392 207020 or email s.sanger-anderson@tozers.co.uk