Debt recovery during the Coronavirus (COVID-19) pandemic

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Debt recovery during the Coronavirus (COVID-19) pandemic

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Regardless of the size of your business a common concern during this challenging time is the management of cash flow.


With concerns as to how long the pandemic and its economic effects will last being unclear, and with much uncertainty ahead, maximising debt collection will be many businesses' priority to secure their interest but also as a source of a much-needed cash flow.


Working in debt recovery we hear a lot of excuses for non-payment of invoices, and a challenge we as debt recovery experts face on a daily basis is the ability to evaluate the situation to assess the true extent and validity of these arguments. With the added pressure and uncertainty of the Covid 19 pandemic, we are hearing how some debtors are now pulling the ‘Corona card’ when the company is still fully operational and can meet their payment obligations. 


Hopefully, the difficult financial situation caused by the lockdown will soon start to be alleviated as the UK starts to transition back to work but, in the meantime, knowing what practical options are available and applying the right debt recovery methods at the right time is more important than ever. Here is some guidance:



Keep the lines of communication open


Ensuring your invoices are paid in challenges times requires special consideration. Keeping the lines of communication open where possible can help to avoid disputes. You can also avoid potential payment issues by asking for payment in advance or a sum on account of full payment, reducing your credit terms for receiving payment, review credit limits, provide regular statements of account and sending frequent reminders for overdue invoices. Regular communication will also enable you to assess which debtors are genuinely facing financial distress and those who may simply be refusing to pay.


To ensure efforts to communicate information do not go awry, ensure you have up to date contact details – i.e., email addresses and telephone numbers for your debtors.


If it remains unpaid – act quickly


Remember most debtors are willing to work constructively with their creditors to reach amicable solutions and avoid legal action, however there at times when stronger action is needed in order for you to maintain your cash flow. 


If the invoice remains unpaid you should act quickly and review the options open to you. You may wish to try to agree a revised payment date or payment plan.


If there are any concerns about the debtor's ability to repay, obtaining professional advice early reduces the risk of expensive and time-consuming litigation in the future. Commencing legal proceedings gives you the opportunity to obtain forms of security, which could significantly increase your chances of recovery if debtors are placed into insolvency in the future.


Letters before action (LBA)


Do not be put off from instructing a debt recovery solicitor to send a letter before action simply because of the lockdown. This can open the lines of communication and establish which clients are truly in difficulty and which ones may be using the current pandemic to avoid making payment. This will:

  • Provide information on how the debt arose
  • Clarify the implications for not responding.
  • Set deadlines/ timeframes. I.e. once the LBA is sent, the minimum deadlines for payment are 30 days for an individual or 14 days for a company, corporate debtor or partnership.


Debt recovery claims


If the debtor fails to respond or pay following the LBA, the next step would usually be to issue court proceedings.


Most claims for unpaid invoices are issued through either the County Court Money Claims Centre (CCMCC) or County Court Bulk Centre (CCBC) and at present both remain operational and claims are being issued every day.


Debt recovery enforcement


Given the amendment made by the Government to the Taking Control of Goods Regulations (2013), enforcement officers are currently unable to attend residential properties under writs of control. Enforcement agents are now working with their collection departments to contact debtors by phone, SMS and email.


Top tips for creditors


Communication is key, but if payment is not received it is essential that swift action is taken to ensure unpaid debts are paid or secured and to protect your own business.

  • Keep communicating
  • Ensure contact details for customers are up to date, obtaining an email address where possible
  • Act quickly - Consider sending LBAs sooner
  • If an agreement cannot be met, consider obtaining professional advice early and taking legal action to avoid any delays caused by a post-lockdown bottleneck


Can we help?


Whether your business has a large volume of debts to recover, or ad hoc debtors, please contact William Angas or Gina Hope to discuss using our debt recovery service. If you have any questions about our fees, please click below to view our brochure.


Download our steps to debt recovery and pricing guide

The content of this webpage is for information only and is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. PDT Solicitors LLP accepts no responsibility for the content of any third party website to which this webpage refers.

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