Sound debt control practices are a key part of the operational considerations for every small business. No matter how fundamentally profitable your underlying business model is, and no matter how astonishingly talented your sales team might be in getting new sign ups – it’s to no avail if too many of your customers are consistently ducking the bill.
While reining in debts can be tricky enough from home based UK clients, it can get steeply more difficult to call in debts from other countries. Having said that, if you’re owed monies by an EU based company – all hope is not lost to get it back. The European Union is the UK’s biggest trading partner – and fortunately, there is a mechanism in place for UK companies to claw back debts owed by other companies based in the EU. The process of requesting money from an EU company is known as making a cross border claim.
Many UK based SME’s don’t know about this process, and so unwittingly let monies owed by EU companies to creep over to the bad debts region of their balance sheet. There are two main ways of making a cross border claim as described below:
- If the EU based company acknowledges, or do not contest the money they owe you – in this instance, you can send a European Payment Order to the company for a quick resolution.
- If the EU company refute owing any monies to you – your next step should be to contact the European Small Claims Court, assuming the billed amount is below Euros 2,000. Your company will be required to fill out the required forms and paperwork, as available at the European Small Claims Court website – this will be reviewed by the court, and forwarded to the defendant, who must reply within 30 days. Based on the documents provided, the court will either determine a ruling or request further information from either party. The court may also ask your company and the defending company to attend an oral hearing.
- If your billed amount exceeds 2,000 Euros, your company will have to use National courts and you’re likely to require professional legal advice and representation.
Before going down any of these routes, it’s always worth opening an honest and calm dialogue with the company that owes the debt. If you have enjoyed a history of business with the firm, and this is the first time you have had trouble obtaining payment, it’s worth considering that going down the legal avenue will very likely result in the loss of that customer from the books. The bigger that customer contributes to your overall sales, the bigger the problem this could become.
Here are some tips when requesting overdue payments from foreign clients:
- Be helpful and understanding. Don’t begin the dialogue with threats of legal action. Instead, try and understand what the problem is. Was the product or service not to the expected standard? Is the company having a spot of short term cashflow bother? By reaching out and demonstrating that you’re being as understandable as possible, you’re far more likely to get a positive outcome.
- Speak to known contacts. If you have a business relationship with a specific person/people within the company who know you personally, talk to them directly and ask why payment has not been made.
- Write to the company officially. Use registered post and provide the relevant billing information.