Do’s and Don’ts of Debt Recovery

August 9, 2021

Chasing customers for unpaid debt is an unfortunate reality for lots of businesses. This can have an impact on cash flow and cause stress and distractions for the management team. However, by following the below guidance, businesses should be better equipped to recover outstanding debts quicker and more effectively than before, whilst also preventing future invoices from becoming overdue in the first instance.

DO

1. Be organised and proactive. Maintain regular dialogue with customers, giving advance notice of when payment is due to ensure they are aware of their obligations. Where payment is not forthcoming by the due date, ensure you make contact with the customer as soon as possible to politely request that the debt is settled imminently.

2. Payment plans. Where the debtor appears to be in financial difficulty, attempt to negotiate a sensible payment plan to clear the outstanding amount by way of instalments.

3. Guarantees. If you have any concerns about the company’s ability to pay, aim to obtain a director’s personal guarantee where possible. By doing so, should the debtor company become insolvent, the guarantor can be chased in his/her personal capacity for the unpaid debt.

4. Limits. Set credit limits if you are hesitant that a customer will be able to make payment.

5. Professional assistance. Where you have exhausted all other options, instruct specialist debt recovery solicitors to recover the debt. Should this become necessary, Darwin Gray’s Litigation department will be happy to assist by initiating formal debt recovery procedures on your behalf.

DON’T

1. Don’t Panic. There are various options available to you as an unsatisfied creditor which include issuing a statutory demand, consulting a debt recovery business or commencing formal legal proceedings to recover the debt.

2. Don’t Lose your cool. While having to chase outstanding invoices is understandably frustrating, sending threats or aggressive correspondence will only serve to sour relations with a customer who may otherwise have cleared the debt and continued to trade with you.

3. Don’t expect miracles. Even where a claim is undisputed, obtaining default judgment against a debtor will take several weeks owing to the Court’s timetables. Moreover, where judgment is obtained, it will then need to be enforced, which will further extend the time it takes to recover the unpaid amount. If a debtor is legitimately struggling, issuing proceedings may not get you the desired results and it may be best to work with them to reach an amicable solution.

4. Don’t lose hope.  You should never feel that you have no recourse, as help is always at hand. Darwin Gray’s Litigation team will be more than happy to discuss your options and help you manage your debts.

Written by Siôn Fôn, Associate in Darwin Gray’s Litigation department

Email: sfon@darwingray.com

Direct dial: 029 2082 9107