Protecting cash flow is vital for the survival of any business and pursuing unpaid debts to your company is frustrating and time consuming. You have up to six years to recover an unpaid invoice or outstanding debt, but ideally you would act quickly to resolve the issue where possible.
Debt recovery is a process that requires flexibility and persistence without damaging your relationship with your customer. The same also applies to private arrangements, for example when someone has loaned an individual a sum of money which wasn’t repaid, it is also possible to pursue them via the same methods.
A letter from a solicitor
The first step is to send a solicitor’s letter to your debtor accompanied by a statement of account showing the sum due.
At Frettens, we follow up the letter with a telephone call to the debtor on your behalf, allowing us to verify that the debtor is still trading, the current address, and whether the debt is disputed.
If the debtor still does not respond, it is viable to consider court action. You must consider whether it makes commercial sense to do so (we can discuss this with you and help you reach the right decision).
Kerri Hunter, Dispute Resolution Solicitor, says “Court proceedings should be the last resort in reclaiming debt – very often the threat of legal action is enough to obtain payment and negotiations with the opposing party must have taken place before court action.”
Winding up proceedings
If the debtor is a limited company, and they are not disputing the quality of the service / goods and the amount owed is more than £750.00, you may wish to consider commencing winding up proceedings.
This involves serving a statutory demand as you need to demonstrate that the debtor cannot pay the debt, followed by an application to the court to wind the company up. This is also known as compulsory liquidation.
If you’re successful, the company assets could be sold, any legal disputes must be settled, the company collects money it’s owed and funds are paid to you and any other creditors.
Debt recovery via mediation
Mediation is a way to control costs and avoid confrontational proceedings. It involves using an independent third party as mediator and the Dispute Resolution Team at Frettens advocate this approach.
Kerri concludes by saying “It is possible to enforce payment or recover the asset and retain a working relationship with the client via careful dealings throughout the process. However, you must consider whether you want to continue working with a client that is unreliable in paying their bills.”
Our Dispute Resolution Team are happy to discuss any issues that this raises for you. If you have any questions, you only have to ask us at Frettens. Please call 01202 499255 and Kerri or a member of the team, will be happy to chat about your situation and your particular requirements.