It has already been seen that the COVID-19 Pandemic has had a detrimental effect on many businesses and the Economy. Unfortunately, it is inevitable that this will carry on for some time.
How do you deal with debtors during this situation? What can you do if someone owes your business money?
Here are some tactics and considerations of dealing with debtors:-
Debts owed/unpaid invoices;
- Be aware of your payment terms; payment upon receipt, 7 days, 30 days etc – whatever it is, attempt to engage with the debtor as soon as your invoice becomes overdue;
- Open up the communication lines as early as possible;
- Be approachable, but be direct, ask if there is a problem. Drill down into why the invoice has not been paid; is it cashflow or is there a dispute?
- Follow up any telephone conversation with an email setting out what was discussed – if there is no dispute at the time the invoice becomes due make sure it is documented so that it is difficult for a dispute to arise later on;
- If it’s cash flow issues, can you assist in offering a payment arrangement? You, of course need to look after your own business needs but are you able to balance your business needs and that of the debtor in today’s climate? Can you accept reasonable instalments? Is something better than nothing?
- Can you hold off applying interest to unpaid invoices if a payment arrangement is made and adhered to? This can be a useful tool in attempting to recover an account in arrears;
- Can you look at the bigger picture? Do you want to continue your working relationship with your customer? Is it repeat business or a one off, this may change your approach. If a debt is owed by a regular customer are they going through a tricky patch, as many business will be, and are they likely to give you more business once and if they are able to get back up and running?
- Know your customer; does your customer have any assets? Do they own any property?
- Is it worth pursuing down a legal route – don’t throw good money after bad, sometimes it’s better to cut your losses – remember principles cost money!
- Is it proportionate to incur the costs of commencing legal proceedings?
If you have exhausted all avenues, there is no payment arrangement and/or communication has stopped, you have done your research on chances of recoverability and you consider it is viable and worthwhile to pursue the debt and incur legal fees, you may decide to start the process for County Court proceedings.
We can help.