How to Box Clever with Debt Recovery
How to be Box Clever
Being in debt is a difficult situation to find yourself in but it can be just as troublesome when you are owed money, often having a detrimental effect on your own credit score and cash flow. To maximise debt recovery and minimise damage to your financial position, you need to box clever.
One of the biggest worries among businesses who are owed money is that they will damage relationships with clients who owe them money. This is especially true if they are not refusing to pay, but rather trying to buy time to assist their own cash flow. If you can afford to be accommodating then a little grace period here and there is sometimes helpful, but it’s a difficult place to come back from once you’ve offered leniency and you may not always be in a position to offer these terms.
Once a client becomes a debtor, they have an obligation to settle their debt, but there are steps to recovering this without having to immediately get heavy. Consider it a graded approach, starting with the most personable way – conversation.
Talk to your debtors
Asking for money is nearly always an uncomfortable discussion, even when it’s your money! But a personal conversation on the phone or face-to-face is often the nudge that’s needed to get debt cleared. People generally respond better to human interaction and it gives both parties the opportunity to talk openly and find a solution.
Send written reminders
If your attempts to resolve the situation with a discussion aren’t fruitful, it’s reasonable to send a debt reminder in writing. This is a more formal request without having to threaten any action. It’s also a better way of tracking activity should the issue escalate. There is no set rule on how many you should send before taking the next action, but if after 2 or 3 letters the debtor is not able to meet your request, it’s time to have a rethink.
Consider debt mediation
If your verbal and written debt recovery reminders still don’t resolve the situation then debt mediation provides a good solution to offer the final olive branch. A debt mediator is different to a debt collector. Mediators help to negotiate payment terms for debtors who are struggling to pay their debts. If you are at risk of not being paid money you are owed, mediation can help to recover some of the debt.
Send a final written warning
If all action so have has proven to be unsuccessful, it’s time to take legal action. Before you instigate this you should write to your debtor to inform them of your intentions. It shows you are serious about recovering your monies and is often the final warning that kick starts action. Ultimately no-one wants to have to go through a legal battle.
Start legal proceedings
The first step is county court proceedings where the debtor has 14 days to pay you in full or make arrangements to repay you in instalments. Failure to meet this will result in them being issued with a CCJ (county court judgment). Alternatively you could file for a controlled goods agreement which instructs Bailiffs to recover the debt. If you don’t want to use a Solicitor then you can serve your debtor with a statutory demand by completing a form 4.1 giving your debtor 21 days to pay or 18 days to have it set aside.
Boxing clever with debt recovery seeks to win the fight tactically. Go in too heavy too soon and you could end up with a knock-out blow in favour of your debtor.