Overdue debt

If one of your customers is late paying you a debt then it’s best you act quickly and decisively.

The longer you avoid chasing the money due the less likely the customer is of paying. If you delay chasing it’s as though you don’t care that much and the customer gets to like their windfall.

Before you dive in though, check a few things out. Check that one of your salesman didn’t give verbal or written extended terms just to get this large order.

Check that there are no technical reasons for withholding payment. Sometimes a customer just won’t mention a technical issue and they’ll wait for you to get heavy handed before disclosing their problem.

Don’t rely on e-mails as a means of debt collecting. Phone them up and don’t be fobbed off by the different lines. The accountants on holiday, we only make payments once a month etc. A company can always make a payment at any time if they are pressured to do so.

Ask around other people in the industry and ask if they have had the same experience with this customer. Has this customer always paid on time and now they are suddenly late. Warning bells are ringing.

If a customer is struggling financially get yourself first in the queue either for a payment or for County Court. They will pay the most aggressive chasers first, it’s human nature.

Be calm and remember that even if it goes to court the customer can always offer payment terms, so offer them the opportunity to pay over three months and stipulate that if they miss any payment then you will issue legal proceedings immediately.

If you manage the situation well and you support a previously reliable customer through their sticky patch, you will have bags of loyalty going forward.

If the customer does not agree to your reasonable suggestion of scheduled payments then go immediately to raise a default summons as the first action in using the County Court to collect your debt. You can only use the default summons process if your claim is undisputed i.e for product delivered and signed for in line with the original purchase order received from the customer and isn’t a claim for damages etc.

You should never need to use a Solicitor to collect money. They have no extra legal power than you and the entire County Court process can be done on-line.

The customer or should we now call them debtor has 14 days to respond to the default summons. There is a small fee for raising the default summons which can be claimed back from the debtor. If the debtor fails to respond you will be able to raise a County Court Judgement against them. A CCJ is the biggest black mark a business can receive and will immediately have an effect on their credit rating. If they ignore this then your next contact will probably be from their newly appointed Administrator.

You can go and visit your former customer and try and collect the goods you delivered provided your Terms and Conditions allow you to do this. This could become a “battle of the forms” if your former customer has incorporated your product into a project.

Sending the boys round to collect debt has been known to work but you are on exceedingly thin ice. Using the County Court is a safer and more legally sound option. If you have any interesting debt collection stories, usually involving “sending the boys round” then please e-mail them to me.