Debt collection is never an easy part of business, but it has to be done. So, to discover the 10 ways you can collect debt without legal intervention, read on…
As a business, ensuring invoices from clients and customers are paid in a timely manner is essential to keeping your company on its feet. Without the security of a monthly income from these clients, there’s no way you can stay afloat. That said, as a business, you have every right to push for payment, without having to get a solicitor involved.
From simply following up with a friendly email or phone call, all the way to seeking statutory demand advice, the options for debt collection are varied. So, to discover 10 ways you can collect debt, without getting a lawyer involved, you came to the right place…
When is Debt Collection Necessary?
Debt collection is the act of collecting outstanding payments from an individual or business. But, in what cases might this be necessary? There are hundreds of occasions where debt might need paying, including:
- Paying an outstanding invoice for a service or product;
- Paying off a mortgage;
- Paying off credit sales;
- Or paying off an invoice for someone’s freelance work.
Getting Prepared for Debt Collection
Collecting debt from a person or company who owes you money can be tricky, and something no one really wants to do. It’s a pretty intimidating task that requires a fair bit of assertion and knowledge. So, avoiding this eventuality at all costs is advised, but how can you do this?
The more in-tune your invoicing and payment systems are, the more likely you’ll be to receive the payments on time. It’ll also mean you can keep track of outstanding payments, so you can seek professional or legal intervention if the time comes. So, to help you avoid the need for debt collection, there are a number safeguards and organisational tips you can take on board to help, including:
- Researching your rights, and what you’re entitled to, so you can be as assertive as possible.
- Setting up a detailed and easy-to-follow system for all payments, be it through an accounting software or your own initiative.
- Setting up a pipeline for all invoices, including a sent date and a follow-up date, so you know when the best time to chase it up will be.
- Alongside this, setting up alerts for when the payment deadline is up could be a good idea, as this is when you’re legally entitled to take action.
- Chase the invoices up as soon as the due date for payment begins to come closer.
- Make it as easy as possible for customers or companies to pay off their outstanding payments.
- Be aware of delaying tactics that people may use, and be prepared to spot them and call people out on it.
10 Ways to Collect Debt Without Legal Intervention
Although you might be thinking that hiring a solicitor to deal with your debt collection is the only way to solve it, you couldn’t be more wrong. In fact, before even seeking help from a professional, these stages of debt collection should be looked into first and foremost:
1. Start by Sending Virtual Reminders
Firstly, begin by chasing the debtor up with an email reminder. As we’ve discussed already, this should be implemented as part of the process of collecting payments, and is the first step to ensuring the money is received.
Whether you send the email just before payment is due to remind them, or directly after so they know it hasn’t been paid, it’s up to you. Either way, it could be a case of the debtor genuinely forgetting to pay. This reminder may be the push they need to pay up, and could be the only steps you require.
2. Speak to the Individual in Person
Then, if the money doesn’t get sent to your account, following it up with a friendly phone call should be the next step. Alternatively, you could even drop by, visiting the debtor in person to see what the hold-up is.
This doesn’t have to be demanding, and can just be a quick conversation to gauge why the money hasn’t been sent. It very well may be that their situation has suddenly changed for the worse, and they are unable to pay right now. A simple conversation to discuss what the next steps should be could be all it takes for payment to be received.
3. Negotiate an Agreed Settlement
In cases like this, speaking in person will allow you to display your empathy for their situation, and draw up an agreement. This could be an extension on the payment, and an agreed date to which this payment should be made.
Keeping a customer on board in this way, using flexibility and human understanding, could help to solve the issue further down the line. That said, if an agreement can’t be drawn up, and it doesn’t look like they’ll be able to pay you, the next steps can be decided. Now, legal or professional intervention may be your only option…
4. Increase Their Interest Rates and/or Charges
For some debtors, they may be putting off payment as a delaying tactic, or simple because they’ve put it on the backburner. After all, paying another company may not be a priority on their to-do list, so they may be procrastinating.
So, a really great way to speed up the payment process is to increase the interest rate, or to claim debt recovery costs under late payment regulations. When collecting debt, this is something you are perfectly entitled to, and is a great way to hurry the debtor along; no one wants to pay higher interest rates, do they?
5. Stop Further Credit Sales
If you or your company offers a product or service, perhaps monthly, you’ll expect a monthly payment from your customer, right? Well, if they don’t pay up, avoiding further credit sales, and cutting what you do for them, is perfectly acceptable. Not only will this encourage the customer to pay up, so they don’t miss out on what you offer, it’ll also help you to avoid further losses.
6. Threaten Them with Legal Action
It is your right to collect this money in a timely manner, so you have every reason to get a solicitor involved. That said, before you even bring a solicitor into the situation, the threat of this solicitor may be enough to encourage them to pay up.
7. Use an Online Debt Collection Service
You’ve now tried badgering them for the payment, and none of this is working, so what’s next? Well, getting online debt collection services involved could be your next port of call.
As we’ve discussed, chasing debt isn’t an easy or pleasant task, and you likely have better things to be getting on with. So, an online service for debt collection enables you to take it out of your hands and move it to a more professional entity. This way, you can get on with your day job, and rely on people who do it every day to chase the payment for you.
8. Hire a Debt Collector
In some ways, hiring actual people or debt collection agencies to collect what you’re owed might be a more effective option; having someone knock on the door demanding money is surely pretty intimidating. These professionals will chase the debt for you, and in some cases might begin the legal process for you too.
Although debt collectors have no more legal power than you do, they have the professional know-how to get the payment sorted ASAP. It’s really the next step away from getting the courts and lawyers involved. So, if you’re prepared to pay the debt collection agency charges for someone to sort it for you, this is the choice for you.
9. Submit a Debt Claim Yourself
We’ve already discussed how debt collectors have no more legal rights than you do with collecting debt, so why not sort it out yourself? Before getting a solicitor involved, you can submit a court claim for the money using the online money claim service. This will allow you to go through the legal process of recovering the debt, walking you through paying a court fee for this.
Before doing so, be sure to educate yourself on what happens in these cases, after all, these are legal court proceedings. So, research the pre-action, as well as what happens if you win the claim. If you succeed, paperwork will have to filled in to confirm the payments have been received, so it’s a lot more hassle to deal with.
10. Send a Statutory Demand
If the debt owed exceeds £5,000, and is under six years old, a statutory demand may be in order. This is the first step to a company making you bankrupt, and is really the final straw before you get a solicitor involved.
Once you’ve filed for a statutory demand, the debtor has 21 days to either pay the debt, or for a deadline to pay to be agreed upon. If this is not adhered to, legal action can be taken.
For small debt recovery, this is a pretty long-winded way to go about things. So, if the number is lower than a few thousand pounds, then using some of the above tips beforehand is advisable. A statutory demand really is a last resort but, if necessary, remember you have every legal right to issue one.
Is Debt Collection Your Next Step?
As we’ve seen, collecting debt is no easy feat. That said, although your first instinct might be to get a lawyer involved, it may be possible to get your money without legal intervention. Through utilising the 10 methods provided above, you can collect debt without having to get a solicitor involved.
If you’ve had any experience collecting debt, or have been on the receiving end of any of these debt collection tactics, let us know in the comments below. How did you cope, what actions were taken, and how quickly was it resolved? We’d love to hear your stories!