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The Debt Collection Process – Advice for SMB Owners

As any small to medium business owner will know, recovering money owed to your business is never an easy process as it can take up so much of your time and energy that would be far more effectively devoted to running and growing your business.  Here is some advice on the process you can follow in order to ensure that you have a good chance of recovering a debt owed by a non-paying customer or client.

Send a Letter Before Action – this is the first step that should be taken before launching any legal proceedings to recover the money owed to your business.  A Letter Before Action (LBA) is a formal letter which clearly sets out the amount owed to your business by the debtor.  This will allow your client a set time period (seven days is the usual time period recommended) in with to pay the outstanding debt or get in touch with you to arrange a payment schedule that is acceptable to both parties.

Start a Legal Claim – if you don’t receive payment or a reply following an LBA, then the next step in the legal process is to issue legal proceedings through a County Court.  This formal process involves a court form being sent to the debtor which requires them to pay the money owed, plus interest and costs, within 14 days.  If the Late Payment of Commercial Debts (Interest) Act 1998 applies, compensation of £40 - £100 will be added to the claim.  An alternative to this is to commence insolvency action, namely winding up proceedings if the money is owed by a business, or bankruptcy proceedings if the debt is owed by an individual.

Judgement – a County Court Judgement (CCJ) is a legal order confirming that the debtor has defaulted on payment and can be obtained immediately after the County Court Claim expires.  A CCJ is a final decision of the Court and provides you with the power to use enforcement action to recover the money owed.  CCJs are recorded against a debtor’s credit record and will affect their ability to obtain credit in future.

Enforcement – when a CCJ has been obtained you can begin immediate proceedings to recover the funds owed.  The most common method of enforcement is to instruct a Bailiff or High Court Enforcement Officer to visit the debtor and recover the funds or seize goods.  However, depending on the circumstance of the case, there are other enforcement methods available.

Here at Access Credit Management, we appreciate that most business owners don’t have the time or inclination to deal with recovering a debt owed to their business and may be put off doing so when considering the collection agency fees.  This is why we offer our services to clients on a no-win, no-fee basis.  This clearly demonstrates the confidence we have that we will successfully recover the debt owed to your business, whether the non-paying entity is another business, or an individual customer.  Using a debt collection agency that operates on a contingency basis is the most cost-efficient method of recovering debts owed to your business.