If a small enterprise has done work or supplied equipment for a larger enterprise and has then sent the bill for the work or equipment but after the usual waiting period the larger enterprise has still not cleared the bill, 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 internally, 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 bill hadn’t been cleared on time and were not concerned about the reasons why.
Apart from the major risk of the larger enterprise opting 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 get in touch with other businesses when an account problem emerges and simply goes straight into Debt collection. A further risk awaits if the small enterprise decide to use Debt collection software and doesn’t read tutorials or use the help or even read the set of instructions to understand the legalities of Debt collection as well as how to best generate Debt collection letters. The risk here is that if the small enterprise eventually opts to take the large enterprise to court then they must demonstrate evidence of having worked hard to get the large enterprise to clear the bill and failed. If they simply send out Debt collection letters without getting in touch with the large enterprise beforehand, this may not be acceptable as sufficient for a court.
Their best option would be to first consult the contract for a late payment paragraph and if present, follow this procedure. If there isn’t such a paragraph 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 context they should communicate with the large enterprise and understand their reasons for not clearing the bill, as it may be a simple oversight on their part which they may well deal with right away. On the other hand it may be that they are somehow unable to clear the bill and they may have cash flow issues themselves because of uncleared bills of their own and so may ask for an extension to the final payment date. These reasons may well be OK for the small enterprise, as they will hope that they can get more work from the large enterprise, as the payment problems may be short lived. If however they aren’t given a acceptable reason for non payment, then they may feel the need to take it further and start off the Debt collection procedure.
If they decide to use either a solicitor who has Debt collection experience or a Debt collection company then they may find that the costs for these services amounts to a significant proportion of the debt itself and if they know of these figures they may well check out the Debt collection software choice as a way of doing the Debt collection internally. In this context, as mentioned earlier, the small enterprise would be well advised to study the set of instructions that should come with the Debt collection software so that they both know the Debt collection procedure and how to generate 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. Actions such as generating and sending out Debt collection letters, recording the arrival of post or emails from the larger enterprise and phone calls should all be registered as part of the work being done for the Debt collection procedure and should be valid if the case comes to court.