Debt recovery is the process of collecting overdue invoices and payments from customers . It is a crucial part of any business, as it helps to ensure that all outstanding debts are collected and that the creditor remains financially secure. The debt recovery process involves several steps, such as identifying delinquent customers, sending out notices and reminders, negotiating repayment plans, and taking legal action if necessary. Understanding these steps can help businesses better manage their debt recovery process and ensure that they get paid in a timely manner. Many organisations operate an internal credit control function but then outsource the debt recovery function to an external third party who is a specialist in this area of work.
Are you looking to maximise income and optimise debt collection processes in a cost-effective manner? Get in touch with Legal Recoveries today.
This process involves the following steps:
Initial Action to take regarding Debtors:
The creditor or creditor’s appointed debt collection agency makes initial contact with the debtor to inform them of the outstanding debt and request payment. There will often be a 30 days collections when contact attempts are made to the customer via different media such as SMS messaging, email and telephone call attempts.
The creditor or debt collection agency [specialist] can investigate where appropriate the debtor’s financial situation to determine the reason for the outstanding debt and their ability to pay. If the customer is a consumer (individual) then homeownership and employment status can be investigated to ascertain any assets the customer may have. If the customer is a commercial entity then a detailed business search can be obtained, again, to ascertain what assets that business has.
The creditor or debt collection agency may negotiate a repayment plan with the debtor that is acceptable to both parties taking into account important factors such as affordability and treataing customers fairly.
Equally, with consent, there may be an opportunity to try to negotiate a full and final settlement payment that it mutually beneficial to both parties.
If negotiations fail, the creditor or debt collection agency may initiate legal action to recover the debt.
Prior to any Court action being commenced the creditor or it’s agent will have to comply with the Debt Recovery Pre-Action Protocol by issuing a letter before claim to the debtor which gives the debtor 30 days within to respond prior to Court action being able to be taken.
If the debtor is not an individual or sole trader then there is no requirement to send the letter before claim and Court proceedings can be issued immediately after the expiration of the letter before action.
Once Court action is commenced by the issuing of a County Court Claim Form the debtor will have 14 days within which to reply to the Claim. The debtor can admit all of the debt by filing an Admission, part of the debt by filing a Part Admission, indicate an intention to defend the claim in whole or in part by filing an Acknowledgment of Service or file a Defence. If the debtor chooses to ignore the Claim Form in it’s entirety then Judgment can be entered after a 14 day period.
Final Recovery process:
Once Judgment has been obtained then enforcement action can be considered if there is no payment or offer made by the debtor including applying for an Attachment of Earnings where it is known the debtor is in full time employment, instructing the High Court Enforcement Agents to attend the debtor’s property for the purposes of obtaining payment or goods to the value of the debt or placing a charge on the debtor’s property if they are a homeowner.
All these steps are important in ensuring that debts are recovered in a timely manner.
Why Debt Recovery is important?
Debt recovery is essential for businesses to maintain and improve their cash flow. When debts are paid on time, businesses have more cash available to invest in their operations, pay their bills, and expand their businesses. It is an important part of a company’s customer relationship management. It is essential to maintain customer relationships by following the right debt recovery process. This process should involve timely and effective communication between the company and its customers to ensure that any outstanding payments are collected in a timely manner. Companies should make sure that their debt collection processes are fair, transparent, and consistent so that customers feel comfortable making payments on time.
Overall, the debt recovery process can be complex and time-consuming, and it often requires the assistance of experienced professionals to ensure that the process is carried out effectively and legally. it is important to keep track of all communications with customers regarding the payment of debts so that any issues can be addressed quickly and efficiently. Are you looking for further information? Get in touch with Legal Recoveries today.