What is involved in pursuing the debt and is it worth instructing lawyers?
As a small to medium business, it is essential you protect your cash flow and maintain good professional relations with your clients and customers. All businesses need systems in place to effectively manage and recover their debt, otherwise, they risk failing.
If you require any assistance in this area, please contact the Debt Recovery Team at Rockliffs Lawyers.
Q. As a small business operator, cash flow is important to me. How can I protect my business from bad debtors?
Prevention of bad debts is obviously better than cure. You should consider implementing a strict debtor management system by firstly ensuring all new customers/clients to your business is subject to your terms of trade or engagement. This should help your customers/clients know and understand from the beginning what is required of them and can help provide you with indicative means of achieving prompt and reliable payment in accordance with your usual terms of trade.
By way of one example, in appropriate circumstances, pursuant to the terms of trade, a creditor could cease work and/or the supply of goods to a debtor where an invoice has been outstanding for a period in excess of 30 days.
Your terms of agreement/trade should be reviewed by Rockliffs to help quick and simple debt recovery where necessary.
Q. I do not have the time or resources to chase outstanding debts, what can I do?
Firstly, you should find the time to maintain your cash flow. Some of our clients have also had experiences where they regularly ignored outstanding debts, and it becomes known in the market place that they were “soft targets” and debtors were aware they would not be pursued vigorously for overdue accounts. This is not the reputation you should be putting forward.
Secondly, if an account is outstanding Rockliffs can assist you setting up a simple and time effective recovery process which will save you time in the future. The first step in the debt recovery process normally involves sending a letter of demand.
Q. What is the minimum debt worth pursuing?
Every debt is worth pursuing. As exampled above, writing off debts can signal to the marketplace, your business is a “soft target”. This approach may also encourage sloppy practices in your business.
Many of our clients have found simply engaging Rockliffs to forward a letter of demand often prompts a debtor into paying the account without the necessity of commencing legal proceedings which is a cost effective recovery means for small debts.
Q. How old does the debt have to be before I can take action to recover the amount outstanding?
This will depend on the terms of your agreement or trade with the debtor. If there are no terms agreed to, after an unreasonable period of time, say 30 days unless an earlier period is usually in your business, you should engage Rockliffs to forward a letter of demand.
Q. I do not want to scare my clients, but I also want them to realise I need to be paid on time. Is there a way I can do this?
Talk to your clients and make sure they appreciate your circumstances. Ensure a valid contract is entered into and they have a copy of your terms of agreement/trade to ensure the obligation to pay is a contractual requirement. Speak to your clients immediately when the account is overdue.
If clients consistently do not pay your accounts, they do not respect your business.
Q. What happens if Rockliffs tries to get my money back and the debtor does not pay any money at all? Do I still have to pay legal costs?
Rockliffs first action is to forward a letter of demand. This is a quick and cost effective means of recovering a debt. Simply forwarding a debtor a letter on our letterhead often prompts the debtor into paying the debt in full or at least putting together an appropriate repayment schedule without the necessity of commencing legal proceedings.
If the matter proceeds, Rockliffs operates on a team basis, so when able, some tasks are delegated to junior staff to ensure legal costs are kept to a minimum. The courts also allow some costs and disbursements to be recovered from a debtor. Each matter is reviewed regularly and the risks explained in simple language to ensure there are no surprises for our clients. When forwarding their final account Rockliffs takes into consideration the amount of the debt recovered for the client, to ensure a good result is achieved.
Q. What is the difference between using Rockliffs and a debt collection agency?
Whilst it may appear to be cheaper to use debt collection agencies, the reality is, it is quite often not. Generally, debt collection agencies charge large commissions/fees for their work notwithstanding the debt to be recovered may be small.
If legal proceedings are required, subject to your terms of agreement/trade, legal costs incurred in chasing the outstanding debt may be recovered from the debtor in accordance with the said terms.
Debt collection agencies are not lawyers and are not entitled to recover legal costs incurred. Many of our larger clients have also experienced far greater success rate with the debt recovery team at Rockliffs than the debt collection agencies previously used by them.
Q. Once a lawyer is involved, what happens next?
For a simple outline of debt recovery processes please refer to “debt recovery” under our services page. If you have any additional queries, please forward an email or telephone, and we will be happy to explain any questions to you.
As a client of Rockliffs, you will be provided with regular updates and before each step, all available options and risks will be explained to you so that you can provide instructions to us.
Q. Will it cost me much to go to Court?
Unfortunately, there is no simple answer to this question and it will depend largely on the amount of the debt, the complexity of the matter and the competency of your lawyer. Deciding to institute proceedings requires a consideration of many matters such as the size of the debt, the prospects of success and whether the debtor has any money to repay the debt.
Once you engage Rockliffs a disclosure of costs will be provided prior to commencing legal proceedings.
Q. What prevention action can I take to ensure future clients/customers will not take advantage of me?
Firstly, you should engage Rockliffs to review the terms and conditions of your agreement.
Secondly, be on the ball with your overdue accounts. Simply by making a telephone call to your client when the account becomes overdue can resolve the situation. Proactive recovery steps will reduce the necessity of legal action.
For further information or advice concerning Debt Recovery, contact the experienced team at Rockliffs Lawyers today.