Recovering Debts – Advice For Businesses

Being owed money is frustrating and recovering the money can be an expensive and stressful process. Throwing good money after bad can only compound the frustration and is a situation that can often be avoided. Issuing Court proceedings to recover a debt does not come without cost and therefore you need to be sure that it is a worthwhile exercise before jumping straight in. Therefore, due diligence is key when ascertaining whether a debtor is worth pursuing and is paramount to successfully recovering your money.

If you are a company or firm and are owed money, the process for debt recovery should begin with you invoicing your client as normal. You and your clients should already have agreed payment terms and you should therefore wait for confirmation that you have received payment.

However, if the invoice remains unpaid following the agreed payment term, you should begin the process of chasing up the payment. If you have exhausted all your usual methods of recovering the debt without success, you may wish to consider suing the debtor as a last resort.

Taking someone to court can be an effective method of debt recovery. If you do decide to do this, there are several things to keep in mind:

1. You need to find out as much as possible about the debtor before taking court action. For example, you will need to provide the court with their full name and address.
2. Seek legal advice, where appropriate.
3. If you decide to go ahead without having sought legal advice or are unrepresented in bringing your claim, find out about the court procedures and your responsibilities.
4. Consider carefully whether you can afford the time and expense
5. Act quickly

Is the case likely to be disputed?

You must consider whether you are likely to win your claim. Most claims issued in the county courts by firms or companies are for money owed for work done and/or goods delivered. These types of claims are often not disputed which means it can be very straightforward to get a court order for payment (a ‘judgment’). If you think your customer may dispute your claim or you are not sure whether it is likely to be successful, you may wish to consider obtaining legal advice.

You might also wish to consider using an alternative dispute resolution procedure before starting the court process. Alternative Dispute Resolution (ADR) schemes are not meant to replace the courts, but they can have advantages over going to court. The advantages include:

• Being more flexible
• Solving your problem faster
• Being less stressful
• Costing you less money

Mediation is one form of ADR and it may be helpful in finding a solution to a dispute where you have an interest in maintaining a long-standing relationship with a person or organisation.

Will you get your money?

Individuals and Sole Traders

Assessing an individual’s ability to repay starts long before they become a debtor. As a customer, they may give you a number of clues as to their current situation. For example:

• Have they mentioned work? / Are they employed?
• If you meet your customer face to face, is their vehicle expensive or are there company logos or decals present?
• Do they own their house or live in a particularly affluent area?

Simply paying attention to your customer can give an indication of how likely you are to recover any debt that may become due.

Companies House and the Gazette often hold a large portion of the desired information and therefore Company debtors can be a little easier to assess.

For example, when looking at a Company on Companies House:

• The overview page will contain company status and whether they are subject to any insolvencies;
• The filing history will show any change of address or directors;
• The accounts filing will give you an idea of their profit/loss (these could be up to 12 months old); and
• There will be documents filed if there are any charges held over the company.

• Undertake searches of the Land Registry to check for property ownership;
• Check insolvency registers to ensure the debt is recoverable and not subject to an IVA or Bankruptcy;
• Verify address details as individuals often move around and nothing frustrates the process quite like no line of contact to your debtor
• Advise you on you the Court procedure, and your likely prospects of success

If you would like advice on pursuing a debt claim, please contact our litigation team on 01305 771 000 or for more information about our debt recovery services and fees, click here.