Recovery of payments is a challenge for small businesses. It significantly hampers their cash flow and profitability. This article describes the legal recourse available to businesses for recovery of their dues.

Of course the first step should be to retain a lawyer and serve a legal notice on the defaulting party. Often the counterparty may give in to the threat of litigation and pay up or at least come to the negotiation table.

Process for the money recovery:

How soon can you send a legal notice? Theoretically, as soon as the amounts have become due. However, it is best to give a little time to the defaulter, no more that that is reasonable given the circumstances, the creditworthiness and track record of the defaulter, and quantum of dues.

You may first write a letter or email yourself and it is recommended that copies of such communication and proof of delivery are retained so that they can be used in subsequent correspondence or litigation to demonstrate that the defaulter has been provided reasonable opportunity and time to pay.

This is also helpful particularly when the defaulter does not respond to such communication – this can be used to establish in the court that the defaulter, through his silence, admits that the money is owed and that he does not dispute it.

A legal notice for recovery of money should clearly describe the sequence of events or transactions that resulted in the obligation on the defaulter to pay.

This, for example, in the case of non-payment for services, would require you to describe the nature of services provided, actual provision of services to the satisfaction of the customer, the payment terms and other contractual conditions, etc. The notice may also refer to contracts entered between the parties, if any, and proof of provision of services, non-payment and other terms. The notice should also clearly prescribe a reasonable timeline for payment of dues and state that nothing in the notice shall prejudice any rights that you may have against the defaulter under law or equity.