Bad Debts: Avoidance and Recovery

Bad Debts: Avoidance and Recovery

It is a fact of life that poor cash flow can damage, or even bring about the downfall of, a business even when sales are on track.  Not being paid for products or services is the worst thing that can happen, particularly for a small business that does not have sufficient working capital.

Chasing payment can also be laborious and costly.  However, the successful recovery of cash is not just about chasing bills but is also about ensuring that you get things right from the outset, before you do the work or deliver the goods.

Key Areas for Consideration

  • Checking an existing or prospective client’s financial status
  • Presenting your terms of trading and getting the client to sign his/her agreement
  • Not tolerating any slippage in your payment terms from the outset –  if you let payment ‘slide’ from a new customer once, you will find it becomes a regular problem
  • Charging interest on overdue amounts
  • Ensuring your terms and conditions contain a retention of title clause so that the goods remain legally yours until payment is received.

With controls in place, and money still owing, that is when debt recovery is a necessity.

Of course, most businesses adopt a ‘friendly approach’ first.  After all, if you are too heavy handed you may lose a perfectly good client who has genuinely forgotten to pay you.

If the problem is more severe, you need to seek professional help.

One approach is to serve a Statutory Demand that requires payment within 21 days. In default of this you can issue insolvency proceedings without first obtaining a Court judgement.

By talking to us at Hand Morgan & Owen, you will be advised of all the options available to you and the pros and cons of each method.

Why Enforce Your Judgment in The High Court?

The High Court equivalent of a County Court Bailiff (a High Court Enforcement Officer “HCEO”) gets paid on results.  Also, for any judgment in excess of £600 you can transfer that judgment from the County Court to the High Court.  The Court Fee of £50 is recovered from the debtor.  Did you know that an HCEO can enter through an open window or by further opening a window which is already partly open, to gain access to a debtor’s property?

For more information please contact Patrick Farrington at Stafford on 01785 211411.

Published on web site – April 2007

Disclaimer

The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances. (50587)