Effective Debt Recovery

• Published date: 11 April 2023
• Subject Matter: Finance and Banking, Consumer Protection, Debt Capital Markets, Financial Services, Consumer Credit
• Law Firm: Lanyon Bowdler
• Author: Ms Lisa Smart

Maximising chances of recovering debt before engaging a specialist

In 2023, many businesses will be looking to reduce their outgoing costs in order to manage the mounting challenges that have presented themselves over the last three years. You may be tempted to put off attempting to recover your debts in the hopes of saving costs and resources, however, there are a few reasons why this may not be the best course of action;

• The clock is ticking: The Limitation Act 1980 places a six year time limit on issuing proceedings, starting from the day the debt became overdue. Once the six year period has passed you will likely be barred from recovering the sums due to you.
• Debtors pay sooner if they are engaged earlier: Debtors will often pay their debts quicker if recovery is attempted sooner. The longer you wait to recover the sums owed to you, the longer it takes to recover them. Debt recovery is only as good as the debtors financial circumstances will allow, and the longer you wait, the worse their circumstances can become, making recovery less likely.
• Evasive debtors: The longer you wait to recover your debt, the more likely it will be that the debtor will have moved from the address you have on file for them. Tracking the debtor down may be a further cost to your business that may not have been necessary if the debt was pursued sooner.

So, how can you maximise the chances of recovery before engaging a debt recovery specialist? Here are our five top tips:

1. Have an effective credit control process in place so you are alerted to your overdue debts as soon as possible.
2. Know your debtor - having the full name of your client and an up to date address is fundamental. Information about employment status, and assets the debtor may own can also be helpful when it comes to debt recovery, especially if it comes to enforcing the debt.
3. Make your payment terms clear on your invoices and in your terms and conditions.
4. Get the agreement in writing. Verbal agreements can be enforceable, but a written agreement is much better evidence if court proceedings are necessary later on down the line.
5. Attempt to contact the debtor as soon as...