Debt. Nobody likes it, least of all businesses that have put their resources into providing goods and services and see nothing in return. As insolvency experts, we understand completely how important it is for businesses to be able to recover their money efficiently. The best ways to achieve this are to understand your options and act as soon as the debts become overdue. The following are some steps we highly recommend you take when this occurs.
Ask for Payment
The most crucial and immediate step you should take when an invoice becomes overdue is to directly contact the business or person who is your creditor through your accountant or by doing it yourself. This step usually coincides with sending written reminders or calling relevant accounts departments. Keep in mind that you may need to be willing to accept a payment plan or debt compromise.
Contact a Debt Collector
A debt collector will first seek to understand the nature of the debt, including amounts, provisions, steps you have taken to collect. They will then obtain the contact information of the debtor and attempt to contact them with a letter requesting payment. Should this fail a letter of demand will be issued. This is necessary if legal action needs to be pursued as it sets out requirements for the debtor to act before a certain date or else be taken to court.
Take Legal Action
Choosing to take the debtor to court can be done once the letter of demand period lapses. To do this you will need to:
- File a complaint with the court
- Serve the debtor with a writ of summons or statement of claim.
- Present your case to the court and await the ruling of the judge.
Should the judge rule that the debtor must pay you and they refuse to, you may then commence winding up proceedings and force the debtor into either bankruptcy or liquidation. The insolvency practitioner will assess the assets of the debtors and disperse assets with your legal costs given top priority for payment.
Is it Worth It?
Whether debt collection is the right course of action for your business will depend largely on a number of factors. There is little benefit in pursuing a debt in this way if there are no assets to be liquidated. Additionally, the money owed to you in the first place will not be considered a priority in a liquidation and will rank evenly or below other creditors. If you wish to know more about the process or better understand your situation, contact us and we can help you lay out your debt collection options and make the best decision.
Disclaimer
This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to RRI Advisory’s clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.