Once an invoice falls overdue, the likelihood of success decreases the older the debt become due.

Almost a third (31%) of SMEs have experienced late payments costing their business critical money and time according to industry research released by Hitachi Capital UK . More worrying are the figures released by the Federation of Small Businesses (FSB) which states that over 50,000 smaller medium enterprises go under every year due to late and non-paying clients. The FSB estimate that the cost to the economy in the UK is as much as £2.5 billion and growing.

In these challenging times what options do businesses have when their invoices are not paid on time?

In-House

A lot of businesses have in-house credit control teams meaning chasing customers for  money yourself is the first logical step.  Your team already understand the relationship you have with those clients and therefore are able to protect and maintain it. This is fine as long as that goodwill is not abused and prompt payment is duly made.

Chasing debt and recovering money is a very time-consuming process that uses up valuable resources that may be more effectively deployed elsewhere in the business. In addition, the stress and worry of chasing old debts could also mean that newer, more recent debts are not given the time and attention.

If the business is of a smaller size in turnover, the credit control function is most likely undertaken on a part time basis or shared by directors with their other duties. This, in turn, leads to further pressure and cost internally and usually leads to escalating debtor days and potentially cash flow issues.

Outsourcing

Outsourcing your debt recovery can feel like a very daunting step for a lot of companies, however, choosing an established and reputable firm can really improve your business. The right debt partner will take time to understand your business and your clients and do all they can to protect your reputation as well as your established client relationships.

Specialist and experienced credit management organisations are experts at recovering outstanding invoices. They have the time and expertise that you may not have available within your company to recover the money on your behalf.  More and more businesses are now outsourcing (white labelling) this part of their business having seen the benefits (cost and time ) using a professional brings.

The cost of outsourcing can be offset against the risk that the money is not collected at all as well as the time you free up by having someone else perform the service for you.

Legal

The final but arguably the most powerful option is to escalate to legal action and this key strategy is becoming more and more used especially in the business to business debt environment. Combined with pre-legal activity, a specialist legal debt firm can explain in no uncertain terms the legal implications of non-payment. Having a debt partner who can combine both the outsource collections (white labelled if required ) option as well as the legal identity improves efficiency, continuity and ultimately delivers results when all other solutions have been exhausted.

In addition, your legal debt partner will also be able to review your terms and conditions and ensure you are suitably armed with the correct legal clauses to enable legal action to be undertaken and spot any potential disputes that poorly written terms sometimes encounter.

If you are struggling to find the time to effectively recover your late payments or debts or you need advice on how to proceed with a particularly stubborn debtor,  then Lupton Fawcett Debt Solutions can help. We are a top 200 Yorkshire-based UK law firm who puts its clients, and their reputations first.

We have expertly and ethically trained debt and legal personnel who can work alongside your business to bring you cost-effective and timely results.

If you’d like to know more, please do get in touch with Robert Barnard on 0113 280 2146 or email Robert.barnard@luptonfawcett.law

Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.

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