A guide to small business debt collection

Small businesses are facing increased challenges with unpaid debt. Unpaid invoices continue to be a major headache for small businesses, stalling their post-covid recovery. Cash flow for businesses is a crucial part of post pandemic recovery. Late payment and unpaid invoices cause serious financial problems to thousands of small businesses every month putting them at risk of insolvency.

By the end of 2021, small business owners in the UK were owed approximately ￡61bn in late payments, that figure is up by 20% on the same time last year.

Figures released by the registry trust show a sharp increase in the number of CCJs (County Court Judgments) issued from 12,597 in Q2 2020 to 20,014 in Q2 2021. The total value of CCJ debt owed by businesses rose by 38%, from ￡56 million to ￡78 million. Both statistics indicate an increase in non-payments across the UK business landscape.

As a business owner, unfortunately it’s likely you’ll come across unpaid debt during your career. Take a look at our handy tips below on how to effectively recover debt and when to seek legal action.

Keep a good relationship with your customers when dealing with debt

If letters and chase emails have been ignored, to avoid the risk of not being paid at all the next stage should be to attempt making contact over the phone.

• Open the lines of communication and better understand why the invoices haven’t been paid
• Try and reach an amicable solution, this will maintain any good working relationship too

If a plan or payment is agreed, make sure it’s adhered to and if not, make immediate contact and let them know your expectations and consequence.

Sticking to timescales is vital – especially as most late payers usually stall to buy themselves more time to make payment. Of course, we know this doesn’t help you and isn’t great for your cash flow.

Debt recovery can seem complex, but if you have a robust procedure in place to deal with any issues quickly and efficiently it will give your business the best chance of recovering any outstanding monies, but remember don’t break your own credit control rules!

Late payment legislation

Late payment legislation is often something that’s forgotten about by small businesses - you can exercise your statutory right to claim interest and compensation under the Late Payment Legislation.

The interest calculation is 8% over the Bank of England base rate for business to business and late payment charge is as follows:

Amount of debt | What you can charge

Up to ￡999.99 | ￡40

￡1,000 to ￡9,999.99 | ￡70

￡10,000 or more | ￡100

When to take legal action to recover unpaid debt

Legal action is an option especially if you have tried everything and your debt is still unpaid. The longer the debt is unpaid, the bigger the damage and impact it has on your business and the more difficult it becomes to collect the debt.

Taking a pro-active approach to recovering what is owed is paramount in keeping that cash flow at a stabilised level. But we understand that for some small business owners, tackling unpaid invoices can be challenging and sometimes outside of your comfort zone, that’s where we come in.

At Wilkin Chapman, we appreciate that dealing with debt is not desirable for any small business owner or sole trader, particularly if you don’t have in depth knowledge of debt recovery or litigation. It takes up time that can be better spent productively elsewhere generating income.

Our 80-strong recoveries team has many years of experience in all sectors of commercial and consumer debt recovery. We offer an efficient solution to take away the stress of outstanding debt collection and allow you time to concentrate on your business. We will manage the end to end process on your behalf and liaise with your customer, focusing on obtaining the cash for you quickly and efficiently.

We offer access to our online portal so you can track the case 24/7, but equally each client receives personal service from a dedicated case manager. We know that as a small business you want to keep costs to a minimum so you’ll be please to know that in most cases, costs can be recovered from the customer meaning that our service is broadly free of charge!

Get in touch

For further information on how we can help you please feel free to contact?Jenna Emsley-Fairbrass ?on 01472 253939 or email?[email protected]