Debt Recovery - If all else fails – the last resort

Whilst Coleman Greig's previous articles on the topic have focused on the steps that a business can take in order to avoid bad debts, the reality is that sometimes, even despite your best efforts, you will be forced into some sort of debt recovery process.

Most people immediately think about legal action when they hear the phrase "debt recovery". While formal proceedings are certainly one way in which a debt can be pursued, it is not always the best way. Court proceedings are typically time consuming and expensive.

It is not feasible to provide a detailed overview of formal debt recovery proceedings in this piece. However, in short, and as many who have been through the process would attest to, it can be a particularly frustrating process. It is extremely important to keep in mind that even if you are successful in having a court award you a judgment, actually getting the money out of the debtor can be a whole other costly and time consuming process. In the end, there is often a very real risk that investing funds in formal recovery proceedings is merely throwing good money after bad.

So what else can a business do to recover its debts?

An alternative to legal action is to report a payment default to Credit Rating Authority. An adverse report by a creditor will affect the ability of the debtor to get credit in the future. This is often a powerful incentive for debtors to pay up, especially where the report is made against an individual. For this reason, obtaining personal guarantees at the outset of the relationship is particularly desirable.

However, as with may things in life, prevention is the best cure. Creating and sticking to a thorough customer engagement and management process will greatly reduce a business' exposure to bad debts and costly and time consuming litigation.  A relatively small investment of time and money at the outset of the customer relationship can save you from a significant investment at the end of that relationship.

Coleman Greig specialises in providing clarity and confidence to business operators in their legal relationships.  If you have a query relating to any of the information in this piece, or you would like to speak with a lawyer in CGCollect, Cleman Greig's Debt Recovery team, please don't hesitate to get in contact today.