The debt recovery process can, so easily, become protracted in such a way as to remove the very idea that a process is at work.
Creditors should drive the process towards the desired outcome.
In the same way as any journey can be made more bearable and less stressful by engaging in certain behaviours before you set out- the correct approach before embarking on a debt collection strategy can prove invaluable. When we say invaluable- we mean that you will save time and/or money.
Good paperwork is good business
Creditors should always try and mitigate the possibility of the Debtor raising an application to set aside a Demand. Processes that require the Debtor to ‘sign off’ orders, deliveries and invoices go some way to mitigate this.
Creditors should consider having processes that complement good record keeping.
Debtor diligence can save a lot of money
We’ve seen many Creditors go to the trouble of serving Demands on former customers, only to realise that all of the address details they held for the Debtor were incorrect. This is a fairly common occurrence, we observe, where the Creditor has a dedicated sales team whose process regarding customer on boarding is not widely understood throughout the Creditors’ business.
Whilst this may have been done already, it’s a useful time to validate the contact information. Go on the Debtors’ website (if there is one) and check the details. If the Debtor is a private individual, a public database check, should assist in validating the contact details.
For an extra level of validation, a means report could be commissioned to provide an asset picture as well as confirmation that the Debtor has been receiving your previous requests for payment.
Charge Interest and claim Compensation Costs
Interest and Debt Recovery costs can be claimed, even if the Creditors’ terms don’t make any mention of them.
At the very least, the extra amount can be used as leverage and negotiated upon with a Debtor. Many Creditors will remove these charges completely in consideration for full payment of the original contract debt.
Care should be taken as to how these are accounted for. These charges are essentially being treated as an income stream if they are paid. Practically, it is best to raise a receipted invoice for these charges and fees, after they are paid by the Debtor as this will provide a reliable audit trail for both parties.
Be clear about what you want and what you have
A Process Server can provide useful intelligence, over and above whether the Debtor was present when they visited. A site visit can give clues as to the Debtors’ general asset position, which could be valuable when deciding to take the insolvency process further.
If you are hoping for the Debtor to contact you and make a repayment proposal, then information which could affect this should be requested. Is the Debtors’ property being advertised for sale? How old are the vehicles on the Debtors’ driveway? These are questions that a Process Server will be able to answer without doing anything too onerous.
A photograph of the Property taken by the Process Server can sometimes prove useful as a reference if the matter develops. It also assists if, for some reason, you want to instruct a different Process Server on the file in the future.
Any information from the Creditors’ file regarding contact with the Debtor is, potentially, very useful for the Process Server. It allows the Process Server to make an assessment of whether the Debtor is likely to be evasive on the doorstep or conduct themselves in such a way as to avoid service before any attendance is made.
Look at the commercial reality
Serving a Demand on a Debtor is pretty final. You are unlikely to receive another order from them ever again. They will, even if the matter is paid, likely place their business elsewhere and they will probably tell their friends about the fact that you were prepared to bankrupt them.
Creditors often take the view that a customer who doesn’t pay is not a customer they want on their ledger. Whilst valid, the commercial reality is sometimes a bit murkier.
It is worth considering the loss of future trade incurred by closing the relationship. This is even more important where the Debtor is well known in the industry.
We’ve seen a case where the Debtor was so well known in the industry that a Statutory Demand for £5,000 led to an evaporation of the Creditors’ order book in several months. The Debtor in question happened to be a supplier of key components to the Creditors major supplier and the CEO was president of a national trade body. We weren’t instructed on the serving that Stat Demand by the way. We were instructed by the Creditor Company liquidators!
Creditors should consider, especially for relatively low balances, instructing a process server simply to attend and deliver a hand written letter setting out the position- and requiring contact to discuss the amount due.
Sometimes a letter with a conciliatory tone delivered by hand from a third party is enough for the Debtor to take things seriously. Don’t just use a standard debt collection letter from your accounting system – make it personal.
Statutory Demands carry big consequences. Even the largest Creditor, with the most dominant of market positions, should be wary of using them as a standard process.
Essentially, in standardising their use you introduce a consistent cost (the cost of the process server) into each Debtor entry on your ledger. If the ledger is large enough, you start to see a lot of cash being utilised by the Credit Control team. Worse still, it also artificially inflates the exposure at the wrong end of your portfolio!
The best use of Statutory Demands comes from being able to selectively deploy them on cases that genuinely need something a bit extra to inspire payment.