When a debtor is refusing to pay, a formal notice of proceedings can prove very persuasive. However, the decision to move to legal action should never be taken lightly. Taking your customers to court is likely to close the door on any potential future business. At Barratt Smith and Brown we consider the role of legal action in the debt recovery process to be the final stage, when all efforts to reach an amicable settlement have failed.
All businesses face the challenge of customers avoiding payments and the negative implications on their financial health. Whether customers consistently pay late or completely avoid payment, it is crucial to recover what is owed. While it is essential to get the cash through the door, doing so in a heavy-handed manner can jeopardize your future business.
It is vitally important to strike a balance between collecting what is due and maintaining your customer relationships.
Effective cash collection processes apply a series of staged interventions to maintain the momentum of payments. The process begins with credit-control, passes through debt collection with the role of legal action in debt recovery being to form the final push when all other avenues have failed.
Stage 1: Credit-control
A good credit-control team will contact customers prior to the payment due date to confirm receipt of invoice and ensure the customer is satisfied with the product or service they have received. This simple courtesy call can help cement customer relationships ensuring your customer feels valued and heard. It will also enable the early identification and resolution of any barriers to payment – helping avoid payment delays.
Stage 2: Debt Collection
Whether managed by an inhouse team or an outsourced third-party provider, an account typically moves into the debt recovery stage when it is over 30 days past due. If credit-control is considered to have the role of nudging customers to pay, the debt recovery stage provides a firm push for settlement. At this stage customers will be reminded of the consequence of non-payment and additional late payment fees can be added to the outstanding bill. Finding the right approach to collecting payments while nurturing those all-important customer relationships is a critical part of the debt recovery process.
Stage 3: Legal Services
When all efforts at an amicable resolution fail, enforcing payment through the courts can be the only option to secure payment. Proceeding to legal action can be costly, time-consuming, and often with no guarantee of success.
The UK and international legal systems can be complex. Although there are many international agreements in the place which outline agreed parameters to support cross territory legal claims these can involve escalating costs and require on the ground knowledge of debt collection laws by territory to be successful.
If a debt is substantial, taking local or cross-border legal action is sometimes the only path to recovering what is owed.
Barratt Smith and Brown specialise in providing a smart litigation service that carefully balances risk and reward. Our specialist inhouse legal team work in conjunction with our network of on the ground lawyers in over 100 countries to review each case on an individual basis and make commercial recommendations to our clients on how to proceed.
Our client consultation process commences once all efforts at amicable recovery have been exhausted and the need to escalate an account is identified. At this stage we will recommend and agree with our clients whether to write off the debt and close the account or move to pre-legal and issue a letter before action.
If the debt passes through the pre-legal stage with a letter before action proving unsuccessful, moving to litigation will now be the only route to recovering what is owed. If legal action is the chosen route, the Barratt Smith and Brown legal services team will advise which legal path to take and the risks, costs, and outcomes. They will manage the entire legal process utilising their expertise to inform and support the client. This will ensure minimal inconvenience for the client whilst optimising the chance of a successful outcome from litigation.
If you have an unresolved debt which you would like help collecting, contact the BSB sales team today at business@thebsbco.com or 0116 2182045
About The Author
Ashley Barratt has over 25 years experience optimising cash collection for global blue chip businesses. Leveraging his 15 years of experience at Centrica, he has secured Barratt, Smith and Brown’s position as a leading provider of outsourced recoveries support to the utilities sector with clients including Business Stream, Corona Energy and Shell. Under his direction, Barratt, Smith and Brown have also taken a lead role in managing UK energy administration collections – handing over 85% of energy administration cases since 2018. Their expertise in energy administrations led to their key role in helping The Citizen’s Advice Bureau develop their Supplier of Last Resort – Good Practice Guide.