Every business will at times struggle with debt collection. Debtors can have a serious impact on cashflow and the viability of the business. At PCL Lawyers, we share insights from Roland Müller, an accredited specialist in commercial litigation and an Associate Partner with our practice, about what legal options clients have with debt recovery.
As a lawyer with extensive experience in litigation and debt recovery, Roland provides clear advice on how to navigate the often-challenging landscape of unpaid invoices and slow-paying clients. Listen to the podcast or read the article to find out more.
The Importance of Serious Follow-Up
When it comes to getting paid, robust follow-up is crucial. Roland emphasises that only sending reminders or slow collection procedures can unintentionally turn you into a credit facility for your debtors. Instead, he suggests setting clear commitments with decisive follow through. For instance, issuing a letter of demand with a specific timeframe, like 7 or 14 days, and taking further action if payment isn't made, sends a strong message that you mean business.
When to Involve a Debt Recovery Lawyer
It is common for business owners to hesitate to involve a lawyer for debt collection for fear of jeopardising business relationships or wanting to give someone the benefit of the doubt. However, a skilled lawyer can help preserve these relationships while asserting your right to payment and setting the right tone for the negotiation if you wish to preserve the relationship.
The right time to engage a debt recovery lawyer is when it becomes clear that payment terms are being flouted and external assistance is necessary. Engaging a lawyer not only increases the chances of getting paid but also maintains professionalism and respect between you and your debtor.
Legal Requirements and Payment Obligations
Having clear payment terms in your service agreements is essential. While there isn't a universal law dictating payment timeframes, establishing contractual obligations before providing services gives you a solid ground for enforcement. This clarity ensures everyone knows when payments are expected, reducing ambiguity and fostering prompt payments.
Setting out clear payment terms and handling complaints and getting your clients to adhere to them is vital for maintaining healthy cash flow. Experienced debt collection lawyers can help you deal with these issues. Having experienced commercial lawyers prepare your service agreements or terms of trade will help manage risk and ensure everyone is clear on their obligations.
The Role of Quality Debt Recovery
Quality debt recovery is about more than just issuing demands; it involves a strategic and thorough approach. Roland highlights the importance of using lawyers over debt collectors, as the latter often use a very formulaic and inflexible approach and can fall short of delivering promised results when debts are disputed. Lawyers provide a formal, tailored and effective method. It will often start with a detailed letter of demand and be followed by necessary legal action if payment isn't made, all with advice along the way.
Effective Communication and Legal Letterheads
A lawyer's letterhead carries more weight and conveys seriousness. Roland emphasises that letters of demand should come from your lawyer, making it clear that you are not handling the matter casually. This approach can expedite payment and demonstrate that you are determined about recovering your debt and resolving any disputes.
Debt Recovery in the Construction Industry
The construction industry often faces significant debt recovery challenges due to supply and timeframe issues. Solvency issues and non-payment to subcontractors are commonplace, even though there are specific prohibitions on 'pay when paid' arrangements. Setting clear expectations and firm boundaries, especially in industries with complex payment structures, is crucial for cashflow. Building and construction dispute lawyers who deal with standard debt collection as well as SOPA claims can help navigate the most viable options for debt recovery.
Legal advice for debt collection
Engaging a debt recovery lawyer will improve your chances of getting paid promptly and experienced lawyers can also help maintain healthy business relationships. By setting clear terms, following through decisively, and involving professionals when needed, you can protect your cash flow and ensure your business thrives.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.