No business wants to lose money especially if they've delivered essential goods or services. Usually clients pay what they owe but sometimes even a little push isn't enough.
Credit Control is essentially the process of collecting the money owed from debtors from the sales invoices that have been sent out to them before, during or after the delivery of goods and services. Credit Control can be for new and existing clients and the entire method is a healthy service that is agreeable to both parties, the debtor (the client) and the creditor (the supplier).
But what happens when that agreeable healthy method breaks down through either poor service, bad communication or outright refusal to settle the invoice debt. It does happen and even with the very best Credit Control, together with firm emails, strong telephone calls and concerted agreements and arrangements from debtors to meet scheduled payment dates to the creditor, sometimes the only option left when you're not getting paid is to undertake debt collection procedures.
Debt Collection is a very fast and effective way of obtaining payment for your outstanding invoice debts. After you have exhausted the standard professional courtesy business Credit Control methods, the next stage is seeking invoice settlement through force. You can expect to lose any on-going customer relationship once the Debt Collection stages occur as Debt Collection uses a variety of enforcement demands including levying interest for late payment, paying for costs incurred and CCJ's.
If the Debt Collection notices are ignored or refused by the debtor, the case will be transferred to County Court Officers where a judgement for money is awarded with 14 days to settle. If after 14 days the balance remains unsettled then the case can be further enforced in the High Court and then finally bankruptcy (personal) or wind-up (company) proceedings can take place to recover the outstanding debt through seized assets and company liquidation.
It's a harsh practice but official Debt Collection works. Ordinarily it is unlikely for a debt to carry itself to the County or even High Court stages as the threat of a CCJ as well as the preceeding Debt Collection stages are sufficient to obtain settlement for outstanding invoice debt. However, you have to be prepared to go all the way, lodge claims and escalate to higher authorities if you have a contracturally evident case for debt recovery through the UK legal system and wish to recovery your costs.
Ultimately, timely and professional monthly Credit Control with pro-active debtor communication and healthy client/supplier relations, will result in a higher payment settlement turnover ratio and a lower debt collection transfer percentage.