As a successful debt collection agency, we don’t believe in telling anyone to stop pursuing debts but there are occasions where spending time and money chasing debtors may not be worth the effort.
In the majority of cases, there are approaches that can be employed to chase a debt – even if your debtor appears to have disappeared off the planet. However, despite knowing all the tricks of the trade, we can tell you there are situations where you may have to accept defeat:
Very Small Debts
When we speak of small debts, this is relative to how much you normally charge for your products or services. If your unit price is small, we suggest you continue chasing for every debt owed. If however you find, for example, that a few pence or £pounds are left on account from an old misallocation or remaining interest on account, you may decide that the value of the debt doesn’t warrant the actions required. When weighing up the options, break down the expenses involved in pursuing the debt such as postal costs, telephone charges and administration time (hourly rate of employee) to help you calculate the true benefit of pursuing the debt. Where the costs are greater than the debt, it may be worth writing the remaining balance off.
Ongoing disputes of invoices can end up being dealt with my mediators or solicitors which both have costs attached. If you are confident you can win the case, it is worth contacting a solicitor once you have exhausted all other means of resolving the query. If the case isn’t clear-cut, you will need to weigh up the costs (both those spent already and those yet to come) against the debt
Serious Financial Difficulty
If your customer is suffering severe financial difficulty, you may not be able to recover the debt. It all depends on what stage they are at. If they have temporary cash flow problems, stay on top of communications and at the very least, push for a payment plan. If your customer has an IVA or Debt Relief Order, or they have filed for insolvency or bankruptcy, you will not be able to push for payment of your invoices although, in the case of the IVA, you may receive installments towards the debt owed. In the other cases, you will probably have to write off the debt.
For further advice on whether you should pursue the debts on your books, contact the team at P&J.