By HM Team – Chester, Liverpool, Birkenhead
Late payments and bad debts are the scourge of SMEs across the UK. According to the Federation of Small Business research, in every quarter in 2022 most small businesses experienced late payments. When you’ve delivered products or services that have met your client’s requirements, you rightly expect to receive the full payment when it’s due. Having to chase them for payment is a waste of time and resources. It can also lead to serious cash flow problems that put your business at risk.
Thankfully, most clients pay overdue invoices after a couple of reminders. However, there are unscrupulous firms out there that have no intention of paying the money they owe or want to pay on their terms. This is when seeking the help of a professional can give you the edge.
Some may see debt recovery agents as a last resort, as their fees can damage your profit margins. Others look to a commercial debt lawyer to recover business debts as this route can result in the debtor paying interest or compensation. Both options can be an effective way to recover money you’d otherwise have to write off as a bad debt – sometimes for invoices up to 6 years old. But what are the warning signs that you need professional help?
In this article written by Karl Hodson of UK Business Finance discusses some of the issues your business could face when trying to call in late debts.
4 signs that it’s time to call in the professionals
1. Your debtor isn’t answering your calls
It’s usually the case that a debtor will respond to your first couple of reminders, often with reasons why they haven’t made the payment and reassurances that they will soon. If there’s still no sign of the payment, this can often be when a bad debtor goes ‘off grid’ and starts ignoring your emails and calls.
At this point, getting business debt collection professionals to initiate contact with the creditor can be enough to prompt the payment. This will show the debtor that you’re serious about collecting the debt and that the consequences of continuing to ignore you will be severe. The team at HM3 Legal has a process that highlights red flags and provides a very affordable initial prompt, responded to by most debtors.
2. They keep on making excuses
A debtor that stays in touch is usually a good sign but if you get excuse after excuse, with each seeming more implausible than the last, at some point, you will have to escalate your collection activity to get some movement.
There can be legitimate reasons why clients don’t pay on time. They may have cash flow problems of their own or there may be an error on the invoice. However, some clients will also try to take advantage.
Common excuses include:
- “We haven’t received the invoice.”
Make sure you always ask who is the right person or team to send the invoice to and request confirmation that they’ve received it.
- “Our payment terms are 60/90/120 days.”
All that matters are the terms that you agreed with the client before the sale. And always make sure you include those terms on your invoice.
- “I can’t pay you until my customers have paid me.”
That’s not your problem. You might decide to give a trusted, regular client some leeway, but a one-off client should always pay within the agreed terms.
- “We don’t have a payment run until next month.”
That’s a classic late-payer excuse. In this case, you should insist that the payment is made by other means or add a late payment fee according to your terms and conditions.
And if the payment is still not forthcoming and your client continues to make excuses, it’s time to call the professional in. The team at HM3 Legal offers a complete process to recover outstanding invoices. Michael Richards, Head of Commercial Recoveries says:
“Recently I have noticed a shift in how people are recovering commercial debts. Often, they have engaged a debt recovery agency – or DRA – only to be abandoned in the middle of the process! People may not realise that by using a law firm, recovering debt is a complete process that does not stop mid-way, that is, continuing beyond the point when a DRA cannot proceed and has to contact a lawyer anyway to finish recovering the money!”
“The difference is we do what we say we will. Start to end. ‘Pay cheap, pay twice’ is my motto as I’m seeing people who began with a DRA, then have had to call in the legal professionals to get the results they want.”
4. You’ve hit a brick wall
If you’ve done everything you can internally to chase the debt without success, such as adding late payment charges and threatening legal action, it’s time to change your approach. The longer you leave it, the more likely you are to have to write off late payments as bad debts, which can cause cash flow problems, reduce morale and damage your business.
Getting help from professionals will help to speed up the payment and allow you to focus on other areas of your business. The lawyers at HM3 Legal work closely with businesses not only to agree the process they would like to follow but also working with your in-house team if preferred, while keeping long-standing client relationships intact. Depending on the process you choose, you could receive full payment within 30 days.
3. You’re spending too much time chasing bad debts
The average SME doesn’t have the time or resources to chase debts from persistent late or non-payers. Over the course of weeks and months, businesses can suffer from lost productivity, with the repeated phone calls and emails often eating into personal and family time.
If you want to regain control of your time, a business debt recovery professional can handle the collections process for you. They’ll improve your likelihood of recovering the debt and let you focus on attracting and serving customers who do pay on time. And recovering money owed may be far more affordable than you think.
Act quickly to avoid non-payment before it’s too late
With increasing costs on businesses, where a company is struggling financially, they will treat certain bills as a priority. You need to become that priority. There is a common saying in the industry, those who shout loudest get paid first. While this will not always be the case, a creditor who is happy to keep chasing without any escalation will be way down the pecking order in comparison to a creditor who is escalating their debt and looking to take further legal action if it does not get paid.
Whatever your position, if you are trying to recover money owed for goods or services provided, consider whether it is time to call in the professionals to help.
Don’t let bad debts burden your business
Chasing debtors is an unavoidable and hugely frustrating part of running an SME. However, if you feel like you’re not getting anywhere or the process is taking too much time, you do have options. Calling a professional can provide peace of mind and give you some control over your collections process, leaving you to spend time on running the business.