If customers ignore reminders, it could be because they are waiting for a significant threat; using a third party can have a stirring effect.
Collection Agents
They work on a 'no collection - no fee' basis and charge 5 - 15% of amounts collected, depending on complexity and volume. Good ones collect over 80% in the first month because of their third-party effect and full-time effort. Send all undisputed debts below a certain value to an agency after a certain time. This releases your own resources to collect large, current amounts from active accounts.
This Debt Collection Agent Checklist sets out the key information which the credit manager should have to hand when appointing a debt collection agency
Non-Court Action
Going to court is not the only way of resolving a dispute. There are other options such as negotiation, mediation, conciliation or arbitration. The civil legal advice website has a number of articles as alternatives to court.
Solicitors
They issue powerful letters in a short space of time, charging a pre-agreed fee. Find a firm specialising in debt collection, not just any solicitor.
Statutory Demands
can be sent by the seller, collection agent or solicitors promising an application to court for the formal Winding-Up of the business if payment is not made within 21 days. Alternatively, the seller can obtain a court order for the debt.
Court Action
Solicitors are essential for High Court actions but not county court. Fees are higher in the more effective High Court. Before suing, check that there is no known dispute, no other useful steps are possible and the customer has the means to settle.
If the seller decides to begin legal proceedings it is advisable that they provide the solicitor with all the necessary information pertaining to the debt in a clear and succinct format from the outset. The seller may use this Form of instruction to solicitors for this purpose.
The Form of instruction to solicitors is designed to ensure that the seller avoids the inaccuracies that can undermine a claim such as:
- The need to ensure that the name under which the seller is suing matches up exactly with the name of the company or trading division with which the customer originally contracted.
- The need to identify the status of the debtor, i.e. whether they are trading as a sole proprietor, as a firm or as a company. This is vital to ensure that the proceedings are being taken against the right party/individual.
- The need to give essential information about the debt itself, such as the amount due, whether it has arisen as a result of goods sold and delivered, services rendered or work done and materials supplied. It is always useful for the solicitor to be given copies of invoices and details of the dates, numbers and payments due under each.
NOTE: Legal procedures in Scotland and Northern Ireland are different from those in England and Wales. Further information can be obtained from the appropriate Sheriff Court in Scotland or county court in Northern Ireland.