I frequently hear that the occurrence of bad debtors worsens during a recession. Indeed, recent figures published by the Registry Trust, the organisation which records all Judgments entered in England and Wales, shows that the number of County Court Judgments (CCJ’s) entered against businesses in England and Wales has dropped by half in the five years since 2009 – the height of the recession.
While this is encouraging news for many, the fact remains that problems with bad debtors exist in all financial climates.
Whether in times of recession or not, I constantly tell my clients that they should keep fully on top of their credit control procedures to ensure any bad debtors are carefully monitored and regularly chased. Effective credit control procedures are key.
A 5-step approach to avoid bad debtors
By following the 5 step approach set out below, you can increase your chances of avoiding bad debtors and getting paid:-
- Send out invoices as soon as they are issued. They should include details of when you expect payment to be made, e.g. 14 days from the date of the invoice (the date stipulated by your terms and conditions)
- If payment has not been made by the deadline, send out a statement reminder, followed up by a phone call to your client reminding them that payment is due
- If after a reasonable period following the sending of the statement nothing has been heard, chase further by phone and letter
- If after numerous chasing, payment has still not materialised, consider whether you wish to formalise the position and threaten to commence proceedings with a view to obtaining Judgment. While threatening a good client is not always easy, especially if you want the relationship to continue, you will need to determine whether such a threat is the push required to get payment.
- If despite the threat of proceedings, payment has still not been made, a decision should now be made as to whether you wish to pursue the debt.
In the vast majority of cases, following the above 5 steps will result in payment of your invoices. However, in some situations, bad debtors will emerge, and if they do, it is important to act quickly in seeking recovery of the debt.
Don’t compromise your company’s financial well-being
Even though the UK economy is now out of recession, the importance of pursuing your debtors remains as important as ever. Having a credit control process is one way in which you can ensure you get paid and protect the financial health of your business.
For more information on debt recovery
If you would like advice on any of the above, or wish to discuss a specific debt situation, please contact Gemma Newing or our read more about our Commercial Debt Recovery Service for businesses in St Albans, Hertfordshire, London and the surrounding areas.