Tips for collecting long-standing debts

Earlier this year, I&L received a phone call from a distressed subcontractor (subbie). They claimed that for months, West Midlands construction firm the Shaylor Group had been ignoring their requests for payment of an overdue invoice.
After a brief consultation, they instructed us to recover the debt on their behalf. Although we were made to jump through a lot of hoops and loops, eventually the Shaylor Group paid £44,000 to settle the invoice, and cover our expenses.
Then, just a few months later, the Shaylor Group fell into administration owing almost 700 creditors £47m. The sad thing is; most of those creditors are small companies who unknowingly provided labour and goods they purchased virtually interest-free.
In effect, they became defacto lenders, supplying labour and materials, even though their invoices will probably remain unpaid.
Invariably in these types of situations, unsecured creditors get shafted and the big companies end up benefitting from all the resources without ever having paid for them.
Update terms and conditions
To avoid this happening to your company, make sure all quotes, sales orders, and contracts include a provision that states counterclaims nor any monies you owe may be set-off against an overdue payment.
These conditions are essential because they compel the debtor to pay the invoice promptly. They also ensure the overdue payment remains independent of any claim made against your company.
Without these stipulations, it’s relatively easy to circumvent payment of an invoice; simply fabricate a dispute. If debtors repeatedly ignore your invoices, why not consider instructing a third party to recover the funds on your behalf?
Factoring in the cost of a third party to manage credit procedures can be a good idea. In many instances, they’ll collect payment for overdue invoices more professionally and dispassionately than you.
Furthermore, removing the burden of invoice-chasing frees up valuable time that can be spent building your business.
Feel free to send I&L examples of your company’s sales contracts and orders for us to assess their effectiveness in credit management and commercial debt recovery.
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