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When trying to recover debts from suppliers or other commercial debtors, it is important that a business has good processes and procedures in place. When one step does not result in the collection of the debt, the business should proceed to the next step. It is important that these steps are followed strictly. These main steps are summarised below. Invoices, reminder letters and phone calls An invoice should set out the date by which payment is due and indicate any penalties or interest to be charged from that date. It should also outline the debt recovery actions that will be taken by the company if the debt is not paid. Periodic reminder issues should be issued, and if no response is received, phone calls should be made to discover if there is any reason for the non-payment and perhaps to reach an agreement on payment. Letter of demand A commercial solicitor can write a strongly worded letter of demand 鈥?also known as a pre-action letter 鈥?demanding payment of the debt and outlining what actions will be taken if the debt is not recovered by a specified date. Debt collection agency Many debt collection companies exist now that can take over your debts for you and chase them on your behalf. The natures of these arrangements differ, but often it involves selling the debt at a discount to the company. Your commercial solicitor will advise you on the use of debt collection agencies. Court action The formal actions that a company can take at court are: A statutory demand A claim to the County Court or High Court, depending on the value of the debt An online claim through HMCS Money Claims Online It is advisable to seek legal advice from a commercial solicitor before commencing any formal court action. Liquidation procedures A company can commence a winding up petition to get the company put into liquidation. This may be used either as an initial action, or to follow up a successful claim being made in the court in order to enforce the judgment and get payment. It is a good idea for all businesses to get a commercial solicitor to look at their debt recovery procedures and assess whether they are legal and whether they can be improved. By having the appropriate documents and clauses drafted by a commercial solicitor, a business can recover substantially more of their outstanding debts. Richard Einerhann works for Contact Law, the UK's foremost legal brokerage company - finding the right company and commercial solicitors and specialist solicitors for your company's needs.
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