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Debt Management: What Are Your Options?
An issue faced by many companies is the time and cost of chasing down money owed. This can be an onerous burden. However, there are steps you can take to ease the process

For many businesses, dealing with late or non-paying customers is part of doing business and for some trades and businesses it may need to be factored in. For businesses starting out, expanding or growing quickly the late payers and non-payment allied to the time and effort required to chase payments can be extremely frustrating and costly to the point of a dangerous risk to your solvency.

What are the warning signs?
To tackle the problem of bad debt, all businesses need to stay alert and spot signs that an invoice issued to a customer could be becoming a problem. If a customer normally pays its invoices on time after 30, 60 or 90 days but payments suddenly start to slip and excuses suddenly start or you can never get hold of the accounts team this could be a sign that they are experiencing cash-flow difficulties.

Another indicator could be if a customer suddenly starts requesting a breakdown of the invoice or a purchase order number after the invoice payment has become due to you. While such requests may of course be entirely justified they could also be symptomatic of the company suffering issues and using stalling tactics because they are experiencing financial problems; or.
you suddenly start getting queries about the payment terms in your terms and conditions.
All businesses should check the credentials and credit worthiness of customers at the outset and monitor the relationship as it develops, but very often the euphoria of the sale overtakes pragmatism and the thought of losing the sale eclipses the right approach.
When dealing with big companies you should also keep a close eye on media reports as these could provide advance notice that a customer is heading for business failure.
If you have salespeople who communicate with people in offices they can usually tell you what is going on, with the first tell tackle sign of cash flow issues is when workers remark that office supplies start getting tight.
Forewarned is forearmed is the best policy. Always try to give your business time to mitigate any financial risks.
Most businesses with shorter trading histories tend to lack the skills and resources to handle debt management issues in house as their success is built on selling and that is what drives most business. It is a rare salesperson that wants to turn away a sale because of worries about payment.
There is also a fallacy amongst many companies that engaging debt recovery or seeking help in collecting revenues is expensive and an admission of failure and unless 100% can be recovered it is not effective.
Debt recovery offers a return on something. We say that 85% of something is better than 100% of nothing and 100% of nothing will be the return if no action is taken. The law also sets out that statutory charges for each invoice and debt recovery fees can be added on so the law is on your side in debt recovery.
As well as helping to recover monies more quickly and prevent late payers turning into a bad debt, early intervention can help to prevent the situation from spiralling into a costlier legal dispute.

Who can you turn to?
When selecting any debt recovery company to provide services, businesses should make sure it has the understanding of any agreements and the contract you have as well as the ways you wish to do business.
Do they have the flexibility to sort the matter?
The ideal is to get paid quickly and retain the customer.
It may well be that a debt is not recoverable, so make sure your debt recovery agency understand contract law and have the expertise to sort out terms and conditions and contract issues that may have arisen.
Make sure that any debt recovery agency puts prevention rather than cure at the top of their list, and can add value to your business proposition.

How to deal with high profile clients
When dealing with key customers, small and medium-sized businesses can be understandably reluctant to put pressure on them to make payments in a timely fashion.
If your terms and conditions say 30 days it means 30 days and is not a target to perhaps aim for.
Some large companies pay based upon their size and power. We were made aware that a large multinational had accountants who purposely did not pay suppliers until 30-60 days beyond agreed terms and boasted that no supplier would dare invoke late payment legislation and add charges under Late Payment Legislation for fear of being delisted..
There may be a perception that the trading relationship is a valuable one, when in fact hidden financial costs or repeated late payments are eroding any profit. In some instances larger companies may put pressure on their supplier(s) to accept longer payment terms or demand discounts. Such behaviour could be a sign that the customer is struggling financially and may have been refused credit elsewhere.
In order to prevent bad debt issues escalating, businesses should make sure they have efficient cash collection systems in place. It does not have to be complicated, simple software will tell you when monies are due. If the customer has signed up to 30-day payment terms, you should ensure you ring them promptly if this date has passed. Apply the same effort to cash collection that you do to sales.
Would any good salesperson not follow up, so why not apply this to being paid?
After 45 days, the business should be sending final demands to the customer quoting Late Payment Legislation and adding the Statutory Charge under law.
If no payment is made by 60 days, then immediate recourse to debt recovery should be sought. Making it clear (preferably in your terms and conditions) that the business has a strict policy in place to tackle late payment of undisputed invoices and will apply The Late Payment of Commercial Debts (Interest) Act 1998 can help to lessen the risk of bad debt arising and staying in touch with late payers can sometimes shed light on the extent of the customer’s financial difficulties.

AVC Debt Recovery
Debt Recovery for Business
19 High Street, Great Bookham, Surrey KT23 4AA
Tel: 0333 121 0161
Email: info@cwlegalservices.com

website: www.avcdebtrecovery.com


Going to court
We always say that going to court is the last resort, but issuing a claim via the court often spurs late payers into action and the fees can be added to the debt.
In most cases, for claims of less than £10,000, it is possible to make use of the small claims track court system.
The system is simple and most debt recovery companies will walk you through the process, but being realistic about what you can claim is always the best policy.
A realistic business debt that is recoverable for a debt recovery company ids £600.00 plus.
It is no good winning in court if there are no assets, but a good debt recovery company will look at all matters.
Whether you are a start up, a fast growing or a fully established business, it is important to establish the right policies and procedures from the start and this should help to manage and stop any late payer turning into a bad debt.
Here at AVC debt Recovery we offer a full range of services from an initial no obligation conversation right up to recovery in the High Court.

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Debt Collectors Can Swear – It’s Official!

Have you, like me, sat through courses on telephone collections? How many times has the course leader emphasised that we must have empathy with the customer. After all if you make “friends” with the customer you’ll be able to establish a rapport and gather information the net effect of which will improve recovery rates. All techniques we’ve been taught – open questions, closed questions, how you open the call and finally closure. Add in a bit of “treating the customers fairly” into the mix and we have the recipe for effective pre-sue collections.
However, some debtors may cause anguish with some of the less patient and less tolerant collectors amongst us. But never lose your cool with the customer. To do so will be a capital offence…or will it?
It has been reported in the London Times (2nd February 2017) that a company employee exercising a credit control function swore at a debtor – the result of which brought an unwanted prosecution.
Judge Daniel Pearce-Higgins was astonished that a defendant came before him charged over calling someone a “pussy”. “That’s an offence is it?” the judge asked prosecutors at Worcester Crown Court on hearing that Aga Cazchowski, 31, had been charged for making the remark on a voicemail. “Good heavens” the Judge said. “It’s fairly standard behaviour in life. I’m concerned criminal law is properly used, not to stop people swearing at each other. To call someone a pussy is impolite. It’s not an offence. It’s unpleasant but not a criminal act. If that’s the case, there’s an awful lot of criminals about.”
The Court heard that Ms Cazchowski had telephoned Karl Smalley, who owed her boss an outstanding debt and left a message using the slur. Mr Smally and his wife Cheryl complained to the police and the case was taken to crown court where a full day’s trial costs taxpayers £3,000. Ms Cazchowski, of Whipton, Exeter, admitted sending a malicious communication which was “grossly offensive” between December 1 and December 7, 2015. However the Judge lambasted the prosecutors and gave her a two year conditional discharge.
So there you have it. It’s not a criminal offence to swear at a debtor. For the sake of clarity may I put on record that it’s never permissible to swear or otherwise “lose your head” when speaking to a customer. At the least it will be a breach of the FCA’s guidelines detailed in CONC and could also be seen to be harassing the customer, which itself is a criminal offence. However, an amusing case nonetheless.
This article was sent to AVC Debt Recovery by Stephen Cowan Managing Partner, Yuill + Kyle, Debt Recovery Credit control Lawyers, Scotland.
Colin A Ward

Colin A Ward

AVC Debt Recovery
Debt Recovery for Business
19 High Street, Great Bookham, Surrey KT23 4AA
Tel: 0333 121 0161
Email: info@cwlegalservices.com

website: www.avcdebtrecovery.com

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Do your contracts comply with the new rules on late payment?

The Late Payment of Commercial Debts Regulations 2013 apply to all contracts entered into on or after 16 March 2013.
AVC Debt Recovery sets out those areas you may wish to look at in your agreements relating to your payment terms.

The original legislation is The Late Payment of Commercial Debts (Interest) Act 1998, which is often referred to.
The aim of the Regulations is to encourage prompt payment of invoices - a continuing issue that may become a problem for all businesses. Recently the government stated that £34.2bn was outstanding as late payments and often larger businesses paying small suppliers are at fault. Late payment affects everybody, but particularly small suppliers suffering cashflow problems, particularly so in the current climate where margins seem to be shrinking.

Time limits for payment
There are now time limits for payment, depending on who you are contracting with:

Public authorities: 30 days unless the contract stipulates a shorter period for payment. This period runs from the later of the date of the invoice or the receipt, acceptance (or, where the contract provides for it, verification) of the goods or services.

Private businesses: 30 days unless the contract contains an express clause on payment. Any express clause may allow up to 60 days from the later of the date of the invoice or receipt, acceptance (or, where the contract provides for it, verification) of the goods or services.
It is possible to agree more than 60 days provided the agreement is in writing and such terms are not “grossly unfair”.
“Grossly unfair” means anything which, in the circumstances, is a gross deviation from good commercial practice and contrary to good faith and fair dealing. As this is a new concept under English law it will be interesting to see how the courts apply this in practice.

What if payment is late?
Under the Regulations the creditor can charge the following:
interest at a rate of 8% over the Bank of England base rate (or such other rate as is agreed);
a fixed statutory charge or compensation charge of £40, £70 or £100 depending on the size of the outstanding debt; and
any other reasonable recovery costs incurred.

What should I do about this?
We recommend that:
you review your standard terms of sale and purchase or any agreements or terms and conditions to see whether any amendments are needed;
When reviewing any new contracts, you enact simple checks and keep a look out for any clauses or terms which may not be in line of the new rules.

Here at AVC Debt Recovery we offer a full service including contract checking, credit control and invoice chasing at fixed cost as well as full recovery services tailoring the best practice to enable clients to get paid with a view to retaining the customer.

www.avcdebtrecovery.com

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What to Look for in Debt Recovery Debt Collection

Looking for Debt Recovery/Collection?

Choosing a Debt Recovery/ Debt Collection Service

You have delivered work OTIF and your patience has reached breaking point. The customer who agreed payment terms has used every excuse in the book (and sometime some that aren’t even in there), not to pay you and played for time at every turn.
Therefore enough is enough. It is important you get your money, but you have to focus on running the rest of your business too. Time to turn to a debt recovery/debt collector for help, but what should you be looking for?

Can’t Pay? We’ll Take it Away.

We have all seen the TV shows featuring large gentlemen intimidating recalcitrant payers into coughing up, the popular image of a debt collector is a large necked man in a suit. We also remember Vinnie Jones in Lock Stock and Two Smoking barrels. This may be the kind of approach some businesses are looking for, but if you value your reputation and brand you are likely to be looking for a more professional approach that approaches debt recovery from the legal standpoint.
The ideal scenario is to get paid whilst continuing to do business with the customer, so sometimes credit control and nudging the customer into the position of payment is the way forward. Whatever happens you must be smart and realistic.
Employing a debt recovery company need not destroy a business relationship, in fact bringing in a third party can remove emotional baggage from the negotiation and leave relationships in better shape after the issue has been resolved.

The Vinnie Jones option is not for business.
A company that employs large necked gentleman with tattoos is not either.
A credit control company that specialises in business debt collection can combine a professional approach with a less aggressive initial contact, quickly ramping up the pressure on the debtor to legal action only if the debtor does not respond positively.
A debt recovery solution that is Free at point of engagement is also an option now thanks to UK government legislation.

Alignment of Interests
Ask yourself what the alignment is with your debt to the ethos of the collection process.
Are you prepared to pay a percentage of the debt to the collector or do you want all the invoiced monies? If you want the former then you need to look at an upfront fixed fee, the latter “No win-No fee”.
Are all interests lined up in the recovery process?
Does the debt recovery company tell you your chances of recovering the monies?

Many legal firms will send an automated threatening legal letter to your debtor for a very small fee. But why would they do this? Clearly its because they hope the debtor ignores it and you have to end up spending money with them taking the debtor through the courts. It’s a simple loss leader for them. The letters have impressive-sounding titles like ‘Letter Before Action’(LBA), but the more it’s used (and there are more and more of legal firms offering this service), the more debtors are getting wise to the idea that the letter costs only a few quid and the threat is empty.

Some debt collection companies charge an upfront fee to work on your behalf or they charge you a percentage of recovered monies. Here the fee of between 10% -20% come out of your monies so you receive 80% - 90% of your monies.
But you can avoid these and instead choose a business that backs itself with a fee that is only charged on successful recovery of your debt . This is called “No win- No fee” debt recovery from a company who use the Late Payment of Commercial Debts (Interest) Act 1998 (2013 Regulations) which enables them to earn money from the addition of fees under late payment legislation. Ultimately most debtors pursued under this methodology do not say, but it is the most effective methodology of debt recovery as the debt recovery company are highly motivated to recover the monies.
All companies who offer “No win- No fee” also operate fixed fee, but many legal firms do not operate “No win – No fee”.

Alignment of the aims is key to choosing your partner in debt recovery as then you know that the company you have chosen has exactly the same interests as you, namely to bring in the most money in the quickest possible time.

Check also that the debt collection company will give you the option to add late payment interest and their fees to the debt to be collected. You now have a statutory right to charge our debtor for these. If these additional sums are successfully collected, the debtor will in effect be paying the debt collector and you’ll be getting the service for nothing.

The Big Stick

It’s important to check that the debt collection service you employ has the capability of taking the case all the way to court in the small number of situations that require it. The reason for this is that the debtor needs to know, deep down, that this has become serious and they really need to deal with your outstanding payment rather than go to court and accrue more cost.

US President Theodore Roosevelt said of foreign policy ‘Speak softly and carry a big stick’. If the polite insistence of your debt collection company is backed up with the credible threat of a court action, then you’re far more likely to get paid quickly and not need to end up in court at all. Check your debt collector has the ability to take your debtor to small claims court, and perhaps more importantly that their website makes it clear to your debtors that this is the case. If the debt recovery company is of the Al Capone type then they will use his phrase on how he got his own way: “… a few kind words and a loaded gun”.

Making the Best

It may be that there are serious financial problems with the debtor company and that you feel that anything you can get out before the train crashes is a bonus. A good debt recovery company will enact credit checks and advise on the chances of a payment. Where it become a case of “impossible to pay " rather than "won’t pay” then a good debt recovery company will not take your money or take the job on. However, when push comes to shove a good debt recovery agency will enable payment. Where financial issues are the case, it is often best if your debt collector can help you agree a payment plan where the debtor pays you in instalments over a few months, with the aim of getting paid ahead of other creditors. Check your debt collection company will negotiate for you rather than just insisting on full payment immediately and driving you into a costly and ultimately fruitless court case. Remember it is not a win if the debtor goes pop and has no assets to cover your debt. It isn’t a win till it’s in (your account). That and the fat lady singing of course.
Here at AVC Debt Recovery we work closely to align the needs of our clients to ensure they receive their monies as fast as possible offering a Free debt recovery service under Late Payment legislation and fixed fee work.

http://www.avcdebtrecovery.com

Post has attachment

Do your contracts comply with the new rules on late payment?
 
The Late Payment of Commercial Debts Regulations 2013 apply to all contracts entered into on or after 16 March 2013. 
AVC Debt Recovery sets out those areas you may wish to look at in your agreements relating to your payment terms.
 
The original legislation is The Late Payment of Commercial Debts (Interest) Act 1998, which is often referred to.
The aim of the Regulations is to encourage prompt payment of invoices - a continuing issue that may become a problem for all businesses. Recently the government stated that £34.2bn was outstanding as late payments and often larger businesses paying small suppliers are at fault. Late payment affects everybody, but particularly small suppliers suffering cashflow problems, particularly so in the current climate where margins seem to be shrinking.
 
Time limits for payment
There are now time limits for payment, depending on who you are contracting with:
 
Public authorities: 30 days unless the contract stipulates a shorter period for payment.  This period runs from the later of the date of the invoice or the receipt, acceptance (or, where the contract provides for it, verification) of the goods or services.
 
Private businesses: 30 days unless the contract contains an express clause on payment.   Any express clause may allow up to 60 days from the later of the date of the invoice or receipt, acceptance (or, where the contract provides for it, verification) of the goods or services. 
It is possible to agree more than 60 days provided the agreement is in writing and such terms are not “grossly unfair”.
“Grossly unfair” means anything which, in the circumstances, is a gross deviation from good commercial practice and contrary to good faith and fair dealing.  As this is a new concept under English law it will be interesting to see how the courts apply this in practice.
 
What if payment is late?
Under the Regulations the creditor can charge the following:
interest at a rate of 8% over the Bank of England base rate (or such other rate as is agreed);
a fixed statutory charge or compensation charge of £40, £70 or £100 depending on the size of the outstanding debt; and
any other reasonable recovery costs incurred.
 
What should I do about this?
We recommend that:
you review your standard terms of sale and purchase or any agreements or terms and conditions to see whether any amendments are needed;
When reviewing any new contracts, you enact simple checks and keep a look out for any clauses or terms which may not be in line of the new rules.
 
Here at AVC Debt Recovery we offer a full service including contract checking, credit control and invoice chasing at fixed cost as well as full recovery services tailoring the best practice to enable clients to get paid with a view to retaining the customer.
www.avcdebtrecovery.com
www.cwcontractlawandlegal.co.uk
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