If a small enterprise has done work or supplied goods for a larger enterprise and has then sent the account for the work or goods but after the required waiting delay the larger enterprise has still not paid the account, what risks are there for going straight to Debt collection?
If the small enterprise went to a solicitor or to a Debt collection agency or then again if they obtained Debt collection software to do the Debt collection themselves, one way or another, the larger enterprise would, at some point, receive Debt collection letters. This might well make the larger enterprise feel that the small enterprise didn’t understand why the account hadn’t been paid on time and were not bothered about the reasons why.
Apart from the major risk of the larger enterprise taking the decision not to use that particular small enterprise in the future, the other business risk is that the small enterprise might well be known as one that doesn’t talk to other organisations when an account problem emerges and simply goes right into Debt collection. A further risk awaits if the small enterprise choose to use Debt collection software and doesn’t read tutorials or use the help or even read the user guide to understand the legal side of Debt collection as well as how to best compose Debt collection letters. The risk here is that if the small enterprise eventually decides to take the large enterprise to court then they must show evidence of having tried hard to get the large enterprise to clear the account and failed. If they just send out Debt collection letters without communication with the large enterprise beforehand, this might not be acceptable as sufficient for a court.
Their best next step would be to first examine the contract for a late payment paragraph and if present, follow this procedure. If there isn’t such a paragraph then they have legal rights to charge interest on the unpaid debt as well as a one-off charge for Debt collection work. In this context they should contact the large enterprise and discover their reasons for not settling the account, as it might be a simple oversight on their part which they might well tidy up right away. On the other hand it might be that they are somehow unable to clear the account and they might have cash flow problems themselves because of uncleared bills of their own and so might ask for an extension to the final clearance date. These reasons might well be satisfactory for the small enterprise, as they will hope that they can get more work from the large enterprise, as the payment problems might be short lived. If however they aren’t given a acceptable reason for non clearance, then they might feel the need to take it further and start off the Debt collection operation.
If they decide to use either a solicitor who has Debt collection experience or a Debt collection agency then they might find that the bill for these services amounts to a significant proportion of the debt itself and if they are aware of these figures they might well check out the Debt collection software path as a method of carrying out the Debt collection themselves. In this context, as mentioned earlier, the small enterprise would be well advised to study the user guide that should come with the Debt collection software so that they both know about the Debt collection operation and how to compose good Debt collection letters. The Debt collection software should include either an internal database or a way of linking to an existing database application so that all happenings that are taken are recorded and date stamped. Events such as creating and sending out Debt collection letters, recording the arrival of post or emails from the larger enterprise and phone calls should all be registered as part of the work being done for the Debt collection operation and should be valid if the case comes to court.
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