How small businesses can recover debts

By Charles MacMillan, partner and head of corporate recovery, Beever and Struthers.

Research by the Forum of Private Business revealed that one in ten small businesses suffered from late payment by their largest customers with over one in five forced to close because of late payments.

The most effective remedy is to pursue the debt through the courts by engaging a solicitor or via the government’s Money Claim Online Service. The latter requires an upfront payment into court, broadly 5 per cent of the debt.

However, a single letter or call from a solicitor can secure swift payment. Late payment interest can usually be claimed at a rate of 8 per cent.

If the debt remains unpaid, a Court Judgement can be obtained, which unless settled in 21 days, will be enforced. This includes: Instructing a bailiff to remove assets from the debtor’s premises Obtaining a charging order over property interests Petitioning for the winding up of the debtor. This option will apply without the need for judgement if the debt is undisputed. The choice of remedy will depend on individual circumstances and the advice of a solicitor should be sought.

If the court option is not desirable it may be possible, if the supply contract allows, to recover goods under a claim for retention of title. This is a complex area and requires professional advice to ensure such a condition is incorporated in dealings with customers. An increasingly popular remedy, particularly for larger disputed debts is for the parties to agree to mediation. This minimises court involvement but has the benefit of resulting in a legally binding agreement.