Navigating Debt Collection: Effective Strategies for Companies Amid Rising Costs

Since the October Budget, businesses have been blindsided by the announcement of the increase in National Insurance Contributions from April 2025. On top of the increase in the National Minimum Wage, payroll costs mean that most businesses will need to address cost saving measures including reviewing salaries; overtime rates and where necessary consider redundancies of non-essential staff.

As the landscape changes, maintaining healthy cash flow becomes even more essential for all businesses, and an effective debt collection process is a key part of this. Without a strong process and framework, businesses risks accumulating bad debts and risking financial stability, which can de-rail strong businesses.

Effective debt collection requires a structured approach that is fair but firm. This can assist with maintaining healthier cash flow and building better customer relationships, meaning more resilience for the business in challenging or changing economic conditions. Key points within such a process can be:

Assess risk – this is essential for existing and new customers. Whilst existing customers may have already been ‘checked’, their financial position could have changed from previous dealings and so it remains essential to assess risks for each new dealing.
Clear terms – a well-defined and clear framework for payment terms sets out, in no uncertain terms, when a customer is required to pay. Such framework should also include any terms for late payment including interest which will accrue, or compensation for late payments. These can then be invoked where necessary.
Prompt action – raising and issuing invoices is essential. Customers are keyed into the payment procedures when they are expecting goods, or have just received the goods or services – take advantage of this and get the invoice in. Invoices should include all details to enable easy payment. Follow up for due dates, and/or late payment should be sent consistently – regular communication maintains a sense of urgency. This should include a set and clear escalation process for if the payment is not made – when is a friendly reminder sent? When is a formal reminder sent? When is a final demand made? Each step should refer to consequences should payments not now be made, e.g. interest accruing or failure to accept further orders. Internal communication is also vital – debt collection should liaise with order processing and vice versa to suspend dealings if necessary to avoid further exposure through increased large debts that are not being dealt with. Suspension can also prompt attention from the customer.

Professionalism should be maintained at all times – language can create tension and manage relationships. A proactive approach is essential, and can reduce debt risks, improve cash flow, improve customer relationships and operational efficiency.

Should these processes not obtain payment, our team would be happy to assist and advise you on legal processes that can be used to obtain payment.

Howes Percival can assist with debt collection, and offer a fixed fee package for payment demand letters. If you have any questions, or would like further information on the content of this article, please contact Matthew Potter or Sam Leaver, who would be happy to help.

The information on this site about legal matters is provided as a general guide only. Although we try to ensure that all of the information on this site is accurate and up to date, this cannot be guaranteed. The information on this site should not be relied upon or construed as constituting legal advice and Howes Percival LLP disclaims liability in relation to its use. You should seek appropriate legal advice before taking or refraining from taking any action.

Get in touch

To contact us, please fill out this form and we will get back in touch as soon as possible. Your personal data will be processed in accordance with our privacy policy which can be found here.

Thank you for your enquiry. We will respond as soon as possible.

First Name

Last Name

Phone Number

Location

Email Address

Service Required:

Message