How to deal with your business’ debtors

Stephen Lewis, of the Better Payment Practice Group, on how to combat tardy payers

A new customer can equal more profits to your firm, but it could also spell disaster if the customer turns out not to be what it seems. It may sound obvious, but it’s vital to be sure of the customer’s identity to help avoid the heartache of receiving a ‘gone-away’ advice in response to your invoice.

Start by getting complete and correct contact details for every customer via a proper Account Opening Form. This must include the correct address and telephone details which should be checked against alternative sources, such as the Yellow Pages.

In the case of a limited company, request the full Limited name and registration number; and for a proprietorship/partnership, ensure that you take private address details and telephone numbers. The Better Payment Practice Group has a sample account opening form on its website 

Using a Credit Reference Agency to check the credit viability of new and existing customers will often reveal any address anomalies which can then be confirmed directly with your customer.

Once you have established the new relationship, maintaining regular contact means you quickly become aware if a debtor relocates. Do not just issue invoices and wait for payment. Contact them by phone to enquire politely whether your invoices have been received, and in doing so, you can verify that the address and telephone details you have remain accurate.

Ask delivery staff to alert you to anything suspicious about the way goods or services are delivered e.g. if the customer insists on collecting the goods, without adequate verification of their trading addresses.

Tracing a debtor

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If a letter is returned via Royal Mail marked ‘Addressee Not Known’ or ‘No longer at this Address’, never assume this is actually the case. Many practised debtors simply return a letter as ‘Gone Away’ to give themselves more time.

Start by taking the following steps:

  • Check your own information to see if you have made any errors on the original information. If you identify an error, reissue your invoice immediately using the correct details.
  • Dial telephone numbers and re-check via a directory-enquiry facility to ensure that you have the correct number.
  • Try a recorded delivery letter as this may be accepted and thus confirm occupancy.

If the debtor appears to be no longer trading from the premises you have details for, then consider the following:

  • Contact the debtor’s local Royal Mail Sorting Offices as they may have forwarding addresses, or may confirm that the subject is ‘still at the address’.
  • If you operate in the vicinity, use your delivery drivers or staff to seek information from the address or from its neighbours. However, you must have due regard to the Data Protection Act 1998. In particular, do not divulge any information about a debt to non-interested parties. You are seeking general information on a ‘private matter’ – “Is there a forwarding address that they know of?”
  • If you know any other suppliers that your customer uses, contact them to enquire if they have been notified of their change of address.
  • For businesses rather than individuals, use the Yellow Pages for the area of enquiry to identify and telephone businesses/newsagents in the locality who may well know the business or have useful information on the business’s status. Again you must have due regard to the Data Protection Act when making such enquiries.
  • Look at the Status/Credit Reference Report you may have obtained when opening the account as this may give you alternative addresses. In the case of a limited company, you are entitled to contact the directors, particularly the Company Secretary, who has an obligation to inform any interested party of the status of the limited company.

You can contact these individuals at their home address or address lodged with Companies House but you cannot make them individually liable for any debt. A polite question should help you establish whether, for example, the company has entered liquidation, or a Creditors Voluntary Arrangement.

If this is the case, you may need to seek professional advice about your rights as an unsecured creditor to a limited company.

If these efforts fail then you could seek the help of a professional collection/tracing company who may quote costs usually from £50 to £60. For further information on debt collection and tracing agents, visit the Credit Services Association at


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