Who Is Your Debtor?
February 2019

Information is the most crucial tool in effective debt recovery processes. Gathering up to date and detailed knowledge of your customers will greatly improve your chances of obtaining payment if they should at any point become a debtor. Where internal credit control processes don’t produce results then having an understanding of a debtor's circumstances is of great benefit before being exposed to the risk of the costs of litigation. It proves to greatly contribute to the cost effective use of court action or diligence, should these services be required.

When taking on a new client, business customer or simply updating the details you hold for longstanding clients it is recommended to gather the following information to build a picture of who your customer is:

New Individual Customers

If you deal with individual consumers it is worthwhile gathering the following:

  • Personal information including valid telephone numbers, email addresses & postal addresses
  • Credit check
  • Employment details
  • Home ownership details
  • Bank details including bank name, account holder(s) details, sort code & account number

The amount of information you require will of course depend on the size of the customer’s potential debt. If the sums involved are small, and court action would not be cost effective, then this full range of information may not be necessary.

New Business Clients

When dealing with new business customers a great place to start is to log the information available on Companies’ House, including:

  • Company owners
  • Registered office details
  • Company registration number/partnership number
  • Director details (including researching any other past or previous businesses owned)
  • Profit levels in recent years

It is good practice to request referees from other businesses to validate the client’s creditworthiness and ensure promises of prompt payment made by the new client are legitimate.

We also urge all of our clients to ensure the terms and conditions of any new commercial contracts are fit for purpose and include a Director’s Personal Guarantee Clause. This clause enters company directors into a personal guarantee with you to assure all and any payments due to you from their company are settled.

Understanding the nature of their business is also key. Consider if the client needs to hold stock or own valuable assets? Who are their customers that are likely to owe them large amounts of money? This information would become very valuable should you have to take any court action.

Longstanding Clients

Once the information listed above has been gathered, ensure that it remains up to date and accurate for longstanding clients.

In addition it can be useful to monitor payment patterns through the course of the business relationship, including logging payments and timescales as well as noting the number of times outstanding payments need to be chased before settlement. This information can shape renegotiations that may be necessary should a client be posing a higher risk than they once were.

The ongoing review of contract terms and conditions is also necessary when dealing with longstanding clients. In our experience over the year’s many client’s contract terms have been out of date and often inadequate if they were to be relied upon in court. Professional advice should be sought periodically to ensure all T&C’s are kept up to date and fit for purpose. If you don’t have a source of advice already available we can refer you to our panel of experienced debt recovery solicitors.

With information gathering becoming more critical, we developed a dedicated Investigations Team which specialises in helping client’s understand their debtors. This team has had a significant impact in helping to reduce litigation costs for our clients by providing a straight forward prognosis in relation to recovery of their debt with clear guidance on the best approach to take to maximise returns.