Bad Credit Debt Relief

The Risks Of A Small Business Starting Debt Collection Proceedings Before Talking To The Large Business Which Owes The Money

If a small enterprise has done projects or supplied goods for a larger enterprise and has then sent the invoice for the projects or goods but after the usual waiting time the larger enterprise has still not paid the invoice, what risks are there for going straight to Debt collection?

If the small enterprise went to a solicitor or to a Debt collection company or then again if they purchased Debt collection software to do the Debt collection in-house, one way or another, the larger enterprise would, at some point, receive Debt collection letters. This may well make the larger enterprise feel that the small enterprise didn’t understand why the invoice hadn’t been paid on time and were not interested in the reasons why.

Apart from the major risk of the larger enterprise taking the decision not to use that particular small enterprise in the future, the other business risk is that the small enterprise may well be known as one that doesn’t communicate with other companies when a payment problem comes up and simply goes straight into Debt collection. A further risk awaits in case the small enterprise choose to use Debt collection software and doesn’t read tutorials or use the help or even read the manual to understand the legal side of Debt collection as well as how to best create Debt collection letters. The risk here is that if the small enterprise eventually opts to take the large enterprise to court then they must produce evidence of having worked hard to get the large enterprise to clear the invoice and failed. If they just send out Debt collection letters without talking to the large enterprise beforehand, this may not be seen as sufficient for a court.

Their best course of action would be to first check the contract for a late payment section and if present, follow this procedure. If there isn’t such a section then they have legal rights to charge interest on the unpaid debt as well as a one-off charge for Debt collection work. In this case they should contact the large enterprise and get to know their reasons for not paying the invoice, as it may be a simple error on their part which they may well tidy up right away. On the other hand it may be that they are somehow unable to clear the invoice and they may have cash flow issues themselves because of uncleared invoices of their own and so may ask for an extension to the final settlement date. These reasons may well be OK for the small enterprise, as they will be hopeful that they can get more projects from the large enterprise, as the payment problems may be short lived. If however they aren’t given a sensible reason for non settlement, then they may feel the need to take it further and start off the Debt collection operation.

If they opt to use either a solicitor who has Debt collection experience or a Debt collection company then they may find that the fees for these services amounts to a significant proportion of the debt itself and if they know about these figures they may well evaluate the Debt collection software route as a method of doing the Debt collection in-house. In this context, as mentioned earlier, the small enterprise would be well advised to study the manual that should be included with the Debt collection software so that they both know about the Debt collection operation and how to create good Debt collection letters. The Debt collection software should include either an internal database or a way of linking to an existing database application so that all activities that are taken are recorded and date stamped. Events such as writing and sending out Debt collection letters, recording the arrival of post or emails from the larger enterprise and phone calls should all be recorded as part of the work being done for the Debt collection operation and should be valid if the case comes to court.