A recent study has indicated that the number of unpaid business invoices in the UK is up by 23%. Last year, 4 out of every 5 businesses said that they had suffered some kind of hardship due to unpaid invoices and non-paying clients. Since the lockdown measures were put in place following the onset of the Covid-19 pandemic, this number has only increased.
For a business, ensuring that all invoices are paid is of the utmost importance. Every company, large or small, relies on a steady income to maintain itself and grow. If this cash flow is interrupted, it can cause a great many problems for the business in question.
Being owed money can be a frustrating and challenging experience, and many business owners know that the recovery process can sometimes be expensive and time-consuming. In some cases, some companies choose to write off the debt entirely, as they see the collections process as a greater cost.
Whilst this is understandable, this is simply not true, and debt should always be recovered if it is practicable to do so. Thankfully, there are many solutions for debt recovery, which gives business owners the ability to proactively take action.
Recovering a Business Debt – 5 Expert Tips
There are both professional solutions and steps that companies can take themselves. Here are some measures that a business can take to recover money from an unpaid invoice.
Being owed money is always a frustrating and stressful experience. This can be made even worse if your company is being put into financial distress because of these unpaid fees.
Even though it can be difficult, you should always remain calm and professional when you are recovering debt.
We are all human, and it is very easy for emotions to get the better of us, especially if a debtor is being antagonistic. Despite this, you should always maintain the moral high ground and be professional whenever you are communicating with the debtor.
Often, it is the debtors intent to make you argumentative, and sometimes they may attempt to provoke you into doing so. This is a tactic designed to give them grounds to withhold payment, so bear this in mind when speaking with them.
Gather All Relevant Documentation
Before starting the debt recovery process, you should gather all relevant documents for your case. Examples of this could be contracts, invoices, receipts or recorded communications.
It is important to do this before speaking to any debtor, as you will be able to present an organised and cohesive case to them. As well as this, you will have evidence in case you need to escalate the matter to a third party, such as a solicitor or a debt collection agency.
As well as this, you should also ensure that you have up to date contact details for the person you need to speak to. Speaking to the office receptionist about a debt that the managing director is responsible for paying is a waste of time, as they cannot help you. Ensure that you only communicate directly with the person that can pay you.
Contact the Debtor and Send Payment Reminders
Once you have all of the necessary documents you should reach out to the debtor and send them a reminder to pay. This reminder should be polite and professional, clearly stating that their payment is overdue.
A good example of this type of message might be:
“Dear [debtor name],
I wanted to send you this message to inform you that your payment of [amount owed] is now overdue. The payment date was on [payment date].
Please can you ensure that the amount of [amount owed] is paid as soon as possible? We have attached the original invoice to this message for your reference.
You should always send this formally, in a way that can be recorded. For example, sending an email with a read receipt on it is a good measure, as is a letter sent via recorded delivery.
An appropriate schedule for sending payment reminders is as follows:
- Send the first reminder less than 14 days after the payment is due
- Send a second reminder if it has been between 14 and 30 days since the payment was due
- Send a final notice letter if it has been more than 30 days since the payment was due
Be careful not to harass the debtor with a constant stream of communications, as this might land you in trouble with the authorities. Only contact them professionally during appropriate hours, for example between 8 am and 6 pm on working days.
Charge Interest on Late Payments
A good way to ensure that payments are made on time is to include a clause on invoices that can add interest on late payments. This is a common method used by many businesses and provides an effective incentive for clients to pay on time.
If you do this, you should clearly state this on your invoices to ensure that your clients are fully aware of the consequences of making a late payment.
Hire a Professional Debt Collector
Despite the best efforts of any business, there will always be those debtors the simply refuse to pay.
If this happens, it is better to seek professional help instead of spending more of your valuable time chasing the debt in-house.
A good professional solution is one provided by a debt collection agency. There are many options, but it is always better to find a specialist in recovering business debt.
For example, in the UK, Federal Management is widely regarded as the leader in commercial debt collection.