Bad debts can ruin businesses. By losing the cash that your business has earned, this can lead to cashflow problems for you and the resultant problems that this will bring.
What would happen to your business if you could not pay your staff, as one of your debtors has gone into administration owing you a lot of money? Could your business survive?
In order to avoid bad debts you should:
1. Use the free Government Beta company check website to find out as much as you can when trading with a Limited Company. Check the Director history which may give you an insight into previously dissolved companies.
2. Check out the business online to see if they have a website registered with any associations and to ensure they are advertised in the telephone directory. Get a personal e-mail address. Be wary of generic e-mail addresses.
3. Obtain proof of personal addresses and proof of business addresses, if possible.
4. Consider asking for Director’s Guarantees when setting up a line of credit to a Limited
5. Consider using a Purchase Order Form and set out in detail what the customer is receiving, be it goods or services, get the Form signed or acknowledged by e-mail if you cannot obtain a signature.
6. Ensure that your Invoices set out a time limit for payment.
7. When payment becomes overdue, write to the customer with a final demand letter enclosing the Invoice, and if payment is not made within 14 days consider instructing a Solicitor. The older a debt becomes, the harder it is to collect.
8. We at Ungoed-Thomas and King offer business clients a unique free Letter Before Action or Notice of Intended Legal Action in relation to trade debts. If payment is then not forthcoming, you might consider using our debt recovery service. We offer set fees for debts up to £10,000 which would fall within the Small Claims Court limit (where recovery of legal costs is limited). The scale of costs start at £125 plus VAT.
Please contact us for further information and ask for our debt recovery leaflet to be sent to you or alternatively you can download this leaflet on our Debt Recovery page on our website