The Risks Of A Small Company Starting Debt Collection Proceedings Before Talking To The Large Company Which Owes The Money

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

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

Apart from the major risk of the larger organisation taking the decision not to use that particular small organisation in the future, the other business risk is that the small organisation might well be known as one that doesn’t communicate with other businesses when an invoice problem comes up and simply goes right into Debt collection. A further risk awaits if the small organisation opt to use Debt collection software and doesn’t read tutorials or use the help or even read the manual to understand the legalities of Debt collection as well as how to best write Debt collection letters. The risk here is that if the small organisation eventually opts to take the large organisation to court then they must produce evidence of having endeavoured to get the large organisation to settle the account and failed. If they simply send out Debt collection letters without communication with the large organisation beforehand, this might not be viewed as sufficient for a court.

Their best option would be to first examine the contract for a late payment section and if present, follow this procedure. If there isn’t such a section 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 case they should get in touch with the large organisation and get to know their reasons for not settling the account, as it might be a simple mistake on their part which they might well sort out right away. On the other hand it might be that they are somehow unable to settle the account and they might have cash flow problems themselves because of unsettled accounts of their own and so might ask for an extension to the final clearance date. These reasons might well be acceptable for the small organisation, as they will be hopeful that they can get more jobs from the large organisation, as the payment problems might be short lived. If however they aren’t given a acceptable reason for non clearance, then they might feel the need to take it further and start off the Debt collection process.

If they decide to use either a solicitor who has Debt collection experience or a Debt collection company then they might find that the fees for these services amounts to a significant proportion of the debt itself and if they know of these figures they might well evaluate the Debt collection software route as a way of handling the Debt collection internally. In this context, as mentioned earlier, the small organisation would be well advised to study the manual that should accompany the Debt collection software so that they both know about the Debt collection process and how to write 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. Activities such as writing and sending out Debt collection letters, recording the arrival of post or emails from the larger organisation and phone calls should all be stored as part of the work being done for the Debt collection process and should be valid if the case comes to court.

Related posts:

1. Getting Debt Collection Software To Work For A Small Enterprise That Needs To Get A Late Invoice Paid By A Large Enterprise.
2. The Debt Collection Choices Available To A Small Business Which Is Owed Money For Work Done For A Large Business.
3. If A Small Enterprise Has Multiple Overdue Bills For Work Done For Several Large Companies, Is The Traditional Way For Debt Collection The Best?
4. Debt Collection And The Business Standing Of The Small Organisation When Owed Money By A Large Organisation
5. Debt Collection Choices For Small Firms Who Have Invoices Outstanding With Larger Firms.