Problem-debtors cause significant financial issues for businesses by reducing cash flow. Irrespective of the quantity owed, outstanding debt is detrimental to operations and for SMEs, the remaining liquid assets may not be sufficient to keep the business operational.
Walker Smith Way partner and debt recovery specialist Jeremy Weaver answers the most common concerns.
Q: My business is owed money that debtors have failed to pay. Is it cost-effective pursuing these debts?
A: If a significant amount is owed to you, then debt recovery will have a positive impact on your business by improving cash flow and turning balances due into net profit.
It would be advisable for you to review each of your debtors in turn to establish quantities owed and assess what negative effect this is having on your business.
A discussion with a solicitor would allow you to assess the legal costs involved and decide whether it would be viable to pursue each of your debtors. We offer a free initial consultation regarding debt recovery and other solicitors might do too. Sometimes just sending debtors a ‘Letter before Action’ will produce immediate payment without the need for court action.
It is sometimes necessary though to issue court proceedings to recover your debt and this will incur a court fee. However if your case is successful then court fees and other costs are often recoverable from the debtor.
Q: What if a debtor ignores my debt recovery claim?
A: If a debt recovery claim is issued in court but is ignored by the debtor then an application for ‘Judgment in Default’ will be made. Here, the court rules in your favour because the debtor has either failed to acknowledge the court proceedings or failed to provide a defence. This court ruling is commonly known as a Court Order.
Q: Can a Court Order be enforced?
A: If a Court Order is obtained and the debtor still fails to pay then it is enforceable. Methods include:
• instructing bailiffs to seize assets
• charging orders on property
• allowing third parties that owe money to the debtor, paying you instead
• money being paid directly to you out of the debtor’s salary
• winding-up a company.
Q: My debtor is a long-standing client. Can I recover my debt without losing the business relationship?
A: Many businesses need to recover client debt, but also wish to continue doing business with them. In this case, rather than immediately taking legal action, consider taking a softer initial approach. Negotiation or face-to-face mediation can often result in payment – and enable both parties to continue doing business in the long term.
For more information on turning debt into profit, phone Jeremy Weaver on 0844 346 3142 or Holly Nelson, Marketing Manager, on 0844 346 3100 or email firstname.lastname@example.org.
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