Contracts with customers are essential and need not be complicated. By Freya Zaiwalla, Solicitor at Zaiwalla & Co.

Whether you are in the moving industry or any other type of business, this tough economic climate, has caused many individuals or companies to find their bad debtors list is growing at an ever alarming rate. The recovery of funds can be a balancing act between time and cost which is especially difficult for small companies who do not have resources for chasing debts.

In business it is always a good idea to plan for every eventuality and the avoidance of debt recovery is an issue worth planning for – indeed can you afford not to?

Debt recovery companies specialise in extracting funds from debtors, but this has added cost implications and needs to be used as a last resort, when all other options have been exhausted.

In the moving industry most debt recovery actions are directed at companies, councils and organisations, not individual residential moves where customers often pay in advance of the services provided. A few simple techniques can be adopted to minimise the risk of late payments and maximise your chances of avoiding debt recovery action.

Before entering into any contract with a new customer it is advisable to check out the company accounts with Companies House, or for an individual, ask for a financial reference.

A contract is essential and should be in the form of a written signed document. This can be a very simple declaration and does not need to be complicated.

In the event of a debtor not paying, a letter to them setting out a period in which to pay and outlining that a failure to do so within the terms will result in you consulting with lawyers, should encourage prompt payment.

Issue a statutory demand on an individual if it is an undisputed debt. This would be a scare tactic, however you do have the right to petition their bankruptcy.

If you still have no response, then a letter from your solicitor will be needed to make them pay the outstanding amount.  There are options to keep the costs down by negotiating a fixed fee agreement with your solicitor or by paying them a low fee with the full rate being paid when the funds are recovered.  It can often take three or four letters to get debtors to pay as they realise the seriousness of your claim.

If the debtor has a serious contention, then court proceedings may have to be issued.  It may be that a settlement can be agreed to avoid a trial and the costs involved.

If the debtor will not respond to any of the previous actions, then a debt recovery company should be used.

In summary:

Forewarned is forearmed – have a debt recovery plan in place for all customers.

• Check company financials;
• Supply a contract;
• Write to the debtor outlining your actions;
• Issue a statutory demand;
• Issue letters from your solicitor;
• Negotiate out of court;
• Debt collectors.

By communicating successfully with your clients and adopting a professional approach to your customer relationships, debts should be kept to a minimum and the recovery of late payments a rare occurrence.

Freya Zaiwalla 

Freya Zaiwalla has been involved in a variety of cases ranging from banking litigations, family and employment matters to Serious Fraud Office investigations.  Freya is currently involved in six separate cases filed in the General Court of the European Union challenging the European Council’s restrictive measures against Iran. 

Visit www.zaiwalla.co.uk