If a small business has done jobs or supplied items for a larger business and has then sent the account for the jobs or items but after the required waiting time the larger business has still not cleared the account, what risks are there for going straight to Debt collection?

If the small business went to a solicitor or to a Debt collection firm or then again if they bought Debt collection software to do the Debt collection internally, one way or another, the larger business would, at some point, receive Debt collection letters. This could well make the larger business feel that the small business didn’t understand why the account hadn’t been cleared on time and were not interested in the reasons why.

Apart from the major risk of the larger business deciding not to use that particular small business in the future, the other business risk is that the small business could well be known as one that doesn’t get in touch with other businesses when an invoice problem comes about and simply goes straight into Debt collection. A further risk awaits if the small business opt to use Debt collection software and doesn’t read tutorials or use the help or even read the manual to understand the legal side of Debt collection as well as how to best generate Debt collection letters. The risk here is that if the small business eventually wants to take the large business to court then they must provide evidence of having attempted to get the large business to pay the account and failed. If they just send out Debt collection letters without getting in touch with the large business beforehand, this could not be seen as sufficient for a court.

Their best option would be to first consult the contract for a late payment clause and if present, follow this procedure. If there isn’t such a clause then they have legal rights to charge interest on the unpaid debt as well as a one-off charge for Debt collection work. In this context they should contact the large business and get to know their reasons for not clearing the account, as it could be a simple error on their part which they could well sort out right away. On the other hand it could be that they are somehow unable to pay the account and they could have cash flow difficulties themselves because of unpaid invoices of their own and so could ask for an extension to the final settlement date. These reasons could well be acceptable for the small business, as they will hope that they can get more jobs from the large business, as the payment problems could be short lived. If however they aren’t given a sensible reason for non settlement, then they could feel the need to take it further and start off the Debt collection procedure.

If they decide to use either a solicitor who has Debt collection experience or a Debt collection firm then they could find that the fees for these services amounts to a significant proportion of the debt itself and if they know about these figures they could well evaluate the Debt collection software path as a method of taking on the Debt collection internally. In this context, as mentioned earlier, the small business would be well advised to study the manual that should accompany the Debt collection software so that they both know about the Debt collection procedure and how to generate good Debt collection letters. The Debt collection software should include either an internal database or a way of linking to an existing database application so that all happenings that are taken are recorded and date stamped. Actions such as writing and sending out Debt collection letters, recording the arrival of post or emails from the larger business and phone calls should all be stored as part of the work being done for the Debt collection procedure and should be valid if the case comes to court.

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