You’ve identified a potential bad debt. You’ve sent the friendly reminder, the follow up letter seven days later, you’ve phoned them two or three times and sent a final notice. You’re not making the progress you’d hoped for. What then?
You don’t particularly want to start formal legal proceedings, as they’ve been a customer for some years but you’re getting increasingly frustrated. The phone rings, it’s the customer telling you about their cash flow problems, but next week will resolve the situation. You agree to give them time. Next week comes and nothing, the following week…nothing.
You phone again and your point of contact is on holiday for two weeks and no one else can assist. Now you are getting increasingly worried. It’s a sizeable debt and you allowed the customer to exceed their agreed limit against your better judgement. You might be a key supplier and of course you could place their account on hold, but that could make the situation worse and dilute any prospect for payment. You need the customer to engage with you and hopefully offer their firm and realistic proposals. What now?
As Insolvency Practitioners we have many years’ experience in dealing with situations such as this. Typically when we are instructed by a creditor, we write to the debtor to advise that we have been consulted and failure to either make payment, or provide an acceptable and deliverable payment plan may result in the creditor taking matters to the next stage, which could ultimately be an insolvency event.
By issuing an unambiguous statement of intent, you make your position clear to the debtor and in doing so you’ll invariably find they’ll try to prioritise payments to you.
We find that the involvement of a third party in such circumstances often produces the desired result. If not, then an assessment would be made to ascertain whether it’s financially viable to pursue matters further.
If you find yourself in this situation and would like to discuss your options, we are happy to provide a free consultation and suggest the appropriate course of action, on a case by case basis.
George C Dale, Director of Business Recovery and Insolvency
firstname.lastname@example.org or 07454 155776 or 01383 628800
Richard Gardiner, Partner & Insolvency Practitioner
email@example.com or 07872 376105 or 01383 628800