When the wheels of business run smoothly, you supply clients and customers with products and services and payments are made within the terms of the invoice. If only it were always so simple. While the majority of your transactions might prove to be a walk in the park, fulfil enough contracts and you’re sure to experience a mysterious case of the ‘disappearing debtor’.
Thankfully, there are a number of techniques you can employ to trace debtors that vanish into thin air, and, as long as you stay within the realms of the Data Protection Act 1998, you’re perfectly entitled to do so. Here’s how you can track those bad debtors down.
The prevention is better than the cure
Pardon the cliché, but in this case it’s true. There is no surer way of avoiding a lengthy and time consuming tracing process than obtaining the correct information from the off.
At the start of every client-supplier relationship, you should collate the contact details of customers via an account opening form. This should contain the correct address, telephone number, company name and registration number. In the case of a sole proprietorship or partnership, you should also obtain the private contact details of the individuals involved. You should also ask for details of the accounts department so you can send invoices directly to those who will process them.
You should also run a company credit check to take a closer look at the customer’s payment record with past suppliers. If it’s less than immaculate, you might want to rethink your relationship.
It’s also beneficial to stay in contact with your debtors. Call the recipient to confirm receipt of the invoice, and, once the payment deadline has passed, contact the debtor straight away, politely at this stage, to show you’re not about to let the invoice lie. The more contact you have, the more quickly you will know when something isn’t right.
Tracking down your debtors
Despite the very best preventative measures, there are times when a debtor disappears underground and there’s nothing you can do. However, as mentioned above, as long as you remain within the framework set out in the Data Protection Act 1998, there are a number of techniques you can use to trace them.
- Run another credit check – At this point it’s well worth running another credit check to see whether the company has recently changed its trading address.
- Search the information held at Companies House – A simple online search query for ‘Companies House Webcheck’ will allow you to search for the registered address of any active company.
- Are they in hiding? – Just because the customer isn’t responding to your contact attempts, it doesn’t mean they aren’t there. Sending a payment reminder via recorded delivery will help to clarify whether they’re still at the same address.
- Contact the local sorting office – If the company has changed location, they might have given Royal Mail a forwarding address.
- Get in touch with other suppliers – Even if you don’t know of other suppliers personally, you should have a good look around the debtor’s website and marketing materials to try to identify other suppliers or customers. They might have a forwarding address.
- Contact a third party – If all else fails, it might be time to contact a debt collection company for assistance. Whilst the vast majority of these tracing methods are free, they do take time, which is a luxury many small and medium-sized businesses simply do not have. A debt collection company will take a cut of the debt, but sometimes it’s better cut your losses and let the professionals do the chasing.