01633 244233 Contact us

19 Jul 2023

Debt Recovery

The Commercial Debt Recovery Process

The commercial debt recovery process involves multiple steps that a commercial litigation solicitor can support you through.

Commercial debt recovery process

Commercial customers paying their invoices on time plays a fundamental role in running a business successfully.

Pursuing slow-paying clients is not only time-consuming but can also be incredibly frustrating for a business.

If your attempts to recover commercial debts have failed, it’s important to seek legal advice and enlist the help of a commercial litigation solicitor.

If you’ve never been through the commercial debt recovery process, you are likely wondering what it entails and what you can expect from it.

The commercial debt recovery process is as follows:

Letter Before Action (LBA)

The first step of the commercial debt recovery process is to send a letter before action.

A letter before action, also known as a letter before claim, is a letter that demands the debtor pays within 14 days and acts as a warning of the intention to start court proceedings.

If the payment is not made, then this will result in court action. Oftentimes, however, a letter before action can be enough to induce action from the debtor.

Issue Legal Proceedings

A commercial litigation solicitor will begin legal proceedings by issuing a claim to the court if the debt is still outstanding following a letter before action or if the debtor disputes the debt in question and you do not agree with the dispute.

Judgment (Or CCJ)

If the debtor does not respond, you can get a CCJ and your commercial litigation solicitor can advise you on the best ways to enforce the debt.

Tips For Minimising Commercial Debt

While seeking legal advice is essential, taking legal action for commercial debt recovery should be viewed as a last resort.

That said, it’s important to take preventative measures to minimise commercial debts occurring in the first place.

Tips for minimising commercial debt and managing slow-paying clients include, but are not limited to:

  1. Make sure your invoices go out on time;
  2. Invoice accordingly to the payment terms;
  3. Make sure you are chasing the right person;
  4. Consider your relationship with your client; and
  5. Perform regular credit checks

1. Make Sure Your Invoices Go Out On Time

It might sound simple, but ensuring your invoices go out on time is the first step to ensuring they are paid on time.

Issuing invoices late can be a common cause of cashflow problems for businesses and can make recovering money from difficult debtors even more of a challenge.

As such, it’s crucial to make sure you have a system in place to ensure your invoices are sent

2. Invoice Accordingly To The Payment Terms

The next tip to minimise commercial debt is to invoice accordingly to the payment terms.

For instance, if it’s set out in the payment terms that the client pays on the last day of the month, then you will need to be proactive and not leave invoicing until the last minute.

As such, it’s important to make sure your client receives the invoice on the 25th or 26th to ensure they receive it in good time and to minimise the likelihood of them paying it late.

3. Make Sure You are Chasing The Right Person

An important tip is to make sure that you’re chasing the right person when it comes to unpaid invoices.

Considering that ‘121 business-related emails are received each day by the average person’, emails and reminders can easily be buried in threads, particularly if you’re not even chasing the right department in the business.

A way to ensure invoices are paid on time is to contact a regular point of contact in conjunction with a team member in the finance department.

4. Consider Your Relationship With Your Client

You will also need to consider your relationship with your client.

Do you have good customer rapport? Are you likely to want to work with this client in the future?

If the answer is yes, then a softer approach might be a better course of action and legal proceedings should only be used as a last resort.

5. Perform Regular Credit Checks

Last, but not least, you can minimise commercial debt by performing credit checks on prospective clients.

Performing credit checks will help you to determine who to take on as clients and who is creditworthy.

That said, it’s worth noting that even reliable customers and businesses can run into financial difficulties, so it’s important to regularly run credit checks.

How We Can Help

At Harding Evans, our debt recovery strategy aims to achieve the best outcome for everyone.

Our specialist debt recovery team includes qualified solicitors as well as our own in-house qualified bailiffs.

If your business is struggling to recover commercial debts, get in touch with a member of our team today.

 

 

Share post