The Risks Of A Small Enterprise Beginning Debt Collection Proceedings Before Talking To The Large Enterprise Which Owes The Money
If a small company has done work or supplied goods for a larger company and has then sent the bill for the work or goods but after the required waiting time the larger company has still not settled the bill, what risks are there for going straight to Debt collection?
If the small company went to a solicitor or to a Debt collection company or then again if they got Debt collection software to do the Debt collection themselves, one way or another, the larger company would, at some point, receive Debt collection letters. This might well make the larger company feel that the small company didn’t understand why the bill hadn’t been settled on time and were not concerned about the reasons why.
Apart from the major risk of the larger company deciding not to use that particular small company in the future, the other business risk is that the small company might well be known as one that doesn’t talk to other enterprises when an account problem arises and simply goes straight into Debt collection. A further risk awaits if the small company choose to use Debt collection software and doesn’t read tutorials or use the help or even read the manual 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 company eventually opts to take the large company to court then they must demonstrate evidence of having tried hard to get the large company to clear the bill and failed. If they simply send out Debt collection letters without getting in touch with the large company beforehand, this might not be acceptable as sufficient for a court.
Their best action would be to first check 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 get in touch with the large company and get to know their reasons for not settling the bill, as it might be a simple oversight on their part which they might well deal with right away. On the other hand it might be that they are somehow unable to clear the bill and they might have cash flow difficulties themselves because of unsettled bills of their own and so might ask for an extension to the final payment date. These reasons might well be satisfactory for the small company, as they will hope that they can get more work from the large company, as the payment problems might be short lived. If however they aren’t given a sensible reason for non payment, then they might feel the need to take it further and start off the Debt collection process.
If they decide to use either a solicitor who has Debt collection experience or a Debt collection company then they might find that the fees 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 option as a method of taking on the Debt collection themselves. In this context, as mentioned earlier, the small company would be well advised to study the manual that should come with the Debt collection software so that they both are aware of the Debt collection process 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 actions that are taken are recorded and date stamped. Activities such as writing and sending out Debt collection letters, recording the arrival of post or emails from the larger company and phone calls should all be stored as part of the work being done for the Debt collection process and should be valid if the case comes to court.
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Tags: collection, debt recovery, invoices, overdue, past due
