Your top 3 questions about debt recovery answered
Deby recovery is an area many businesses rely on but don’t always fully understand. Today, we’re going to provide some answers to the top three questions that we get asked by clients:
How can I go about recovering debts without causing upset to valuable customers?
Good customers generally appreciate the fact that creditors take a firm stance when it comes to credit control. If you are experiencing problems collecting payment from a customer you should get in touch with them to discuss the situation and make sure there are no unresolved issues or problems relating to their account. If everything is in order, explain the steps you intend to take in seeking recovery of the debt they owe, including information about potential legal proceedings. You should keep in mind at times that although this customer may have purchased from you in the past, the fact they have allowed their account to fall into arrears makes them far less of a valued customer to your business.
Should I pursue overdue debts?
In most cases it is worth considering whether the expense incurred pursuing outstanding debt will result in successful recovery. Debts of less than £100 could well be written off; however, this might set a precedent for your business and encourage greater amounts of bad debt from customers. It’s worth assessing each case on an individual basis, before making any decision to write off debts, irrespective of the amount of money that’s owed to you.
Is it possible to charge interest on overdue bills?
If your initial contract with this customer does not specify interest terms, you will be covered under the Late Payment of Commercial Debts (Interest) Act 1988 which allows you to charge interest at the Bank of England base rate plus an additional 8% for any debts that are overdue by more than 30 days. You could also be entitled to claim back the costs of collecting any overdue debts, although this is generally specified within the contract. It is not general practice for businesses to charge interest on overdue debts, however, unless the case has moved forward to a court of law.