Credit Managers want payments, Sales Managers want happy customers – where does the balance lie?
Every businessman and businesswoman will tell you that cash flow is king, however if you have no customers - you have no cash. Non-paying customers are a drain on your resources. If a customer isn’t paying what is due, you are essentially providing free goods/services! Clearly this is a situation no business wants, but is one that most are faced with at some time or another.
The Sales force would like a “softly softly” approach to keep customers sweet, with the hope of getting repeat business, but Credit Managers want payment now, realising that a non-paying customer isn’t necessarily one you want to pander to. There are some cases where you may allow more leeway for payments – i.e. if a customer is genuinely trying to work with you to reduce their indebtedness, but companies can be making a rod for their own back if they don’t have robust credit control procedures in place.
Escalating non-payments
If you have a non-payer, who is ignoring your credit control efforts, and you decide to escalate matters further by engaging solicitors to take up the baton, what considerations do you need to bear in mind?
Firstly, does your client have any dispute on the invoice? If so, then you should always attempt to resolve issues before passing the debt out for collection. Most solicitors charge on a time basis for dealing with disputes, so it is better to deal with this in house where possible-
Does your client have any money? Consideration should always be given to whether you are throwing good money after bad by continuing with action. The cost of sending a chaser letter is usually worth the initial attempt to see if your debtor will engage with the solicitors. A payment arrangement at this stage is better than getting nothing.
When to consider legal proceedings?
So now you have gone through all the pre-legal options and have still not recovered your money, do you continue and issue legal proceedings?
Being aware of the cost of proceedings can help you decide whether to continue with action. Some smaller businesses may be put off by the rising costs of issuing claims, however the alternative is to write off £££ in bad debts. If you consider a debt to be truly unrecoverable, then limiting your costs makes sense – but if you think it is a case of won’t pay rather than can’t pay, then issuing legal proceedings may be the only way to force a conclusion.
As with anything, knowledge is key. It may seem strange for a solicitor to be advocating not issuing proceedings (and thereby missing out on fees) however your advisor should always have YOUR best interests at the heart of their advice – even if it is not what you want to hear.
Decision
As ever, the decision whether to carry on with action is a commercial one, especially when the Court fees are rising almost yearly. The old adage of “he who shouts loudest gets heard first” does ring true. Getting your proceedings in at the first sign of payment problems generally gets you at the front of the queue.
If you have any concerns about the issues discussed in this blog or require further advice, our Debt Recovery team are here to help. Please do not hesitate to get in touch.