If the small firm who completed the contract is newly formed then they will be keen to get established in the business area they are in. Whether they are newly formed or established, when presented with a large firm who are reluctant in settling their bills, the small firm will have to try and convince them to pay in full, while at the same time not hindering the chances of further work.
A new firm might well have been set up with help from government agencies such as Business Link, who would have given them full information on managing their business including debt collection, so they should either consult the information pack or go and talk with Business Link before they do anything else. An established firm may have found themselves in this situation previously and may have a Debt collection strategy in place. Also, there is legislation in place to help small companies in debt collection from larger companies in the form of the “Late Payment of Commercial Debts (Interest) Act 2002”, which authorises the small firm, i.e. the creditor, to make a one off charge against the large firm, i.e. the debtor, for an overdue payment, as well as this they can also charge interest on the outstanding debt. The creditor has the option of not applying these charges, but it would be a wise move to try and agree with the debtor that this should be part of a updated contract, so that both parties have agreement that payments will be made on time and there will be no need for a debt collection process.
Not withstanding advice from Business Link, a new small firm may wish to consider three choices for debt collection; consult with a solicitor who specialises in debt collection, find a debt collection company in the area, or finally check out Debt collection software and take on the debt collection themselves.
These three choices are also worth thinking about for an established firm, which has a debt collection strategy, in case they wish to revaluate their procedures.
Taking on the services of a solicitor or debt collection company may be costly for a small firm, as they are paying for the skills of each party in the hope that they will be successful in recovering the debt, creating Debt collection letters that may work first time. The positive side is that they would not require much time from the small firm, who can be left to get on with their work while the other party contacts the debtor for settlement.
By doing the work themselves, the small firm has to make adequate resource available if they wish to succeed and so the person operating the debt collection software should ideally have some knowledge of the legal aspects and also have a good standard of spoken and written English. This latter skill is needed when creating debt collection letters as these can be so crucial in the debt collection strategy as they form a major part of the record of dealings between creditor and debtor. The positives are; the small firm is in control of the debt collection strategy, they pay a one-off price for the debt collection software package, and it is reusable for future debts at very little cost.
