Q. What are the first steps in debt recovery?
A. Firstly, we gather as much information about the debtor as possible. We ask the client for details of the debt and debtor and any documents such as invoices, statements of account and CCJ’s (if applicable.) We will also carry out Company Searches or Land Registry Searches in the case of property disputes. Once we have all the information we need, we can prepare and serve the Final Demands or the Statutory Demands.
Q. What if my debtor ignores these Demands?
A. Quite often, the debtor responds quickly to Demands. However, if they don’t we proceed with follow up action. In the case of Final Demands we perform telephone follow up calls and then doorstep collections. In the case of ignored Statutory Demands we can then issue a Winding Up or Bankruptcy Petition.
Q. That sounds scary, is it?
A. A Winding Up or Bankruptcy Petition is very serious and generally something you want to avoid for your business. This is why we find this gets such good collection results and delivers the money you are owed back to you as quickly as possible.
Q. Ok, what if my debtor is served a Final Demand and doesn’t respond to telephone follow ups/doorstep collections?
A. In that case we proceed with County Court Action, sometimes the treat of a CCJ against your name is enough to resolve the debt. If not, the debt will go to a court hearing and then a Judgment will be enforced.
“I don’t need those, where can I go wrong?
What do you mean it’s a company registered in Hong Kong!”
- There are many different services offering credit checks including Experian, Dun & Bradstreet, Equifax, Creditsafe to name but a few.
- These companies Impose strict credit limits.
- A credit check will let you know what kind of business you are dealing with, be it a Limited Company, a Partnership or a Sole Trader. It will also show the registered address and company number if it is a Limited Company, and whether or not they are still trading.
- Credit checks give you access to the list of Directors and Shareholders, past and present.
- They also display any past County Court Judgments the company has and a current credit rating.
- Consider completing credit application forms.
- Think about Associate Directorships and the history of that individual.
3 Legal Terms Explained.
Liquidation. – Liquidation is the process of the ending of a company. This can follow a Winding Up Petition from the court. When a company is in Liquidation, all the assets are distributed to cover outstanding debts. After this, the company ceases to exist.
Insolvency. – Insolvency means you are unable to pay your debts. You will become insolvent when your losses consume your surplus assets.
Solvent. – Whether a company is solvent or not depends on the liquidation status. A company in liquidation is not solvent unless the directors can declare they can pay all creditors within a year.
“Our credit control, that’s dealt with by Mrs Stanage
She only comes in once a month, that’s all she can manage.”
- Effective phone calls. Have you got the right person making the right calls? A Credit Controller should be firm but fair. Credit Controllers need to be able to take the rough with the smooth and to expect to be shouted at – debt is an emotional subject. Aid consistency by assigning Credit Controllers to customers so they can monitor the payment process effectively and personally as it develops.
- Ensure you keep proper history notes of the best day and time to call. Voicemails can go ignored or be avoided. Avoided calls equal avoided payment.
- Have a proper structure and procedure. Call your customer once the invoice has been sent to make sure it has been received. This will be seen as courteous and is also smart practise as you will know if they are choosing to ignore it if payment doesn’t happen following confirmation of receipt.
- Deal with queries quickly and don’t allow customers to withhold the whole debt if a small credit note could resolve the problem.
- Issue regular, clear statements followed by at least one reminder and a final demand.
- Put the customer on stop if you are supplying an ongoing service or goods to encourage them to make payment, save your resources and prevent further owings.
- If you agree to any instalment arrangement, ensure that you put this agreement in an e-mail or letter of confirmation. Make sure you keep a copy of any cheque payment made by a customer paying in instalments.
The importance of clarity.
A key part in avoiding being owed outstanding debts by clients is invoicing clearly and correctly. The client needs to be able to easily see how much they owe you for your products or services. You will also need to present your invoices to a debt collection agency should it come to an unpaid invoice leading to outstanding debt, so it is essential that they are clear, concise and correct.
“I’m shouting at you, can’t you hear my voice? What do you mean you haven’t received my invoice?”
– Kerry Bland.
Keep the layout simple, you don’t need to over complicate things and it’s best to stick to a basic template of contact and payment details at the top, details of the products/services that you are billing for below and a clear total at the bottom. Your contact and payment details should be thorough and clear; a fussy and complicated invoice is more likely to make its way towards the bottom of a client’s ‘to-do’ list and delay payment further. Ensure your final total is inclusive of VAT, discounts, offers and promotions, postage, expenses and any other extra charges. These all should be clearly listed and totalled cumulatively.
Why not save yourself some time and use a template, good, basic invoice templates can be downloaded from websites such as freelanceuk.com and freelanceadvisor.co.uk. Once you have a template add these top tips to ensure your invoices have big-voices.
· Clearly state your payment terms, eg; ‘payment must be received 30 days from date of invoice.’
· Offer discount on next purchases for payments received inside normal trading terms.
· Itemise if applicable eg; ‘5 phone calls and 2 letters’, ‘17 widgets supplied at 15p per widget.’
· Include the contact name(s) of the person who is likely to authorise payment, this is the person who deals with your accounts and invoices. If this person isn’t you, ensure you add their name so it gets sent back for their attention.
· If requested, supply purchase order numbers.
· If e-mailing invoice, also send by first class post to be double-sure it is received.
· Send an interim invoice to “test the water.”
· Try and set up a monthly retainer, preferably by standing order.
· Offer various ways to pay eg; Bank transfer, credit card or even PayPal.
· Make sure both your company registration number and the VAT registration number are clearly displayed.
· Give each invoice a unique number in the header. This number is often prefixed by the client’s name eg; ‘JONES456’, this can be used as a future reference for both parties. Invoice numbers are mandatory for VAT registered traders and companies.
· Put your bank details on the invoice to make it easier for bank transfers and to prevent delays.
Consider factoring your invoices (selling your invoices to a third party before they are paid by your customers.) Factoring is a good option to ensure regular cash flow but it can be expensive. On average, factoring fees generally range from 1% to 12%. Factoring is unlike other forms of finance such as an overdraft or loan as acquiring it normally requires little personal security as it is secured against future income (money you have already earned.)
Overall, clarity, consistency and simplicity are the keys to effective invoicing. Follow our tips and use online templates to create a clean, easy to read and more importantly, easy to pay invoice! An invoice like this is much less likely to end up at the bottom of a pile and much more likely to turn into hard earned funds in your bank account!