When is it appropriate to take legal action? Depends on many factors. I was asked this in reply to a recent post in this blog – “How To Ask For An Account Payment“. The normal answer, of course, is avoid taking legal action until you absolutely have to. Suing a slow paying debtor is normally very costly.
If that doesn’t work, try and phone them. Check out Telephone Skills for some help with the what, when and how to do this. (Note: If they’re regular “slow payers”, chase them up by email before the payment’s due!) Writing is always less confrontational.
- * Threaten to damage their credit rating
- * Order a Lawyers Letter of Demand. Get a quote from a firm first, give them the details. This’ll show the debtor that you really mean business.
- Does the debtor have the capacity to pay?
- Do they have assets to cover the debt?
- How much will it cost to sue
- Are they likely to defend (that’ll cost a lot more)?
- … other factors?
You’ll find sections of this book, How to collect business debts (written by Jim Heath) helpful when considering whether legal action is appropriate or not.
Some more links that will help
01 September – PRESS RELEASE – Jump in Queensland court fees will make it harder for SMEs to chase bad debts
an earlier post in this blog – a bird in the hand