Debt Collection Advice
At some point in the life of every small business there will be a need for debt collection. It is inevitable that there will be clients and customers who for one reason or another do not pay the bill they have been sent by your business. So it is necessary for you or your staff to have some understanding of the principles of debt collection to ensure that your business is not exposed to unmanageable amounts of risk in relation to unpaid invoices or contracts not fulfilled.
So what is the standard process of debt collection?
1. The first step in any process of debt collection is to gather all of the information about the debt into one place and store the information in a file which you can access later on. The initial essential information which you will need to collect will be the name, address and contact details of the debtor, how much they owe you and on what basis and the documentation which can be used to prove this. Once you have this basic information, you can move to the initial steps of debt collection.
2. The second major step in the debt collection process is to contact the debtor in a relatively low key or informal way. If you know them in person and you can go and see them at their place of business and remind them they need to pay an invoice or if you give them a telephone call to this effect this will recover any debt where the debtor has simply forgotten to pay you or has an administration problem with their business which means that they are a bit disorganised.
3. Sending a letter of demand – If this informal step does not work, the next thing that you try is putting something in writing. Initially, this involves:
Sending a payment reminder notice
Sending a letter of demand – A letter of demand is a letter which outlines the basis of the debt and then gives the debtor and ultimatum to pay or face legal action.
If you get to the end of this process and the still has not paid then you will have to hire a lawyer because you have reached the legal stage of the debt recovery process.
Your lawyer will either a issue a statement of claim against the debtor or if they are a company, they may issue a statutory demand. However, this is the basis process of debt collection.