How to Recover Debt without Going to Court
Are you facing a late payment and worried about taking it to court?
Once a business takes a debtor to small claims court, you’re likely to get your money back quickly, but any working relationship with that client is gone out the window. Before things go that far there are plenty of steps you can take to get your payments without burning bridges.
Step One – Set Things Up to Reduce Chances of Late Payment
The first step comes before you even face a problem. Sorry if you’re already facing a debtor, but for the future it’s good to know how to prevent it.
Make sure your contract states with crystal clarity when payments are due and what happens when they are late. Also, draw attention to this with new clients, you can even negotiate on the various factors of it and get them to agree verbally. Once they realize how seriously you take it, they’re less likely to put you to the end of their list of businesses to pay.
If you make it clear to them that you work with a debt collection agency (DCA) such as P&J Consumer Debt Services and that they instantly take over handling any late payments for you, this gets you right to the top of the list.
Step Two – Decide if the Debt’s Worth Your Time
You’ve really got to decide if it’s even worth pursuing the payment. For a small debt then your time and effort might be better spent working on your business, and you could put the loss down to experience. Although bear in mind that when you start letting late payers go, it can set a precedent for others.
As part of this process, check up on them to see if they’re solvent. Ask the local court to check the Register of County Court Judgments on them.
If they have one, or a debt relief order, or they are already insolvent, then there’s little chance you’ll get your money back. But if they seem to be in decent financial shape; move onto the next step.
Step Three – Communicate Clearly
Firstly, give them a gentle reminder. Not need to charge at them all guns blazing the first day they are late. Some clients will forget through disorganization.
Secondly, after your warning time is up give them a demand for payment, explaining clearly what they owe, how to pay you, how long they’ve got and what will happen if they don’t pay you by a certain date, including interest fees and charges for collection procedures.
It helps a great deal if all this was specified in the contract at the beginning, because then they knew it was coming and are less likely to feel bitter towards you.
Step Four – Be Flexible
When you talk to them, try to understand their position, and offer to arrange part payments over time. If they have cash flow problems, they’ll appreciate some leniency. But be clear to hold to your new arrangements.
Step Five – Be Persistent and Noisy
Don’t allow them to ignore you. It’s likely they have cash flow issues and owe a few companies late payments. You don’t want to be the quiet one, which they think hasn’t even noticed the late payment. Contact them often, even daily. By calling, email, letter and even visits if it’s convenient.
This persistence is hugely powerful in getting people to pay up. Be politely insistent and firm.
Step Six – Threaten to Cut Off Services, and a DCA
If you have that kind of a business arrangement, you could threaten to cut off services, which will often sort things out. And the threat of a DCA will also usually push the right buttons. But if that still doesn’t work; it’s time to put that threat into action.
Step Seven – Follow Through
Cut off services and hand things over to your DCA. That letter through the post is a healthy shock to most debtors. And enough to clean things up. Allow your DCA, who are professionals at chasing debts, to carry out all the tricks they know.
Scott Bryan is a financial blogger who enjoys explaining the arcane world of finance in everyday terms. Formerly a high street bank manager for over thirty years, he knows that everyone has unique requirements and so is dedicated to helping you find the right solution for you. He now works as an freelance financial writer when not consulting.