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Tag: Commercial Debts

Debts: to collect or not to collect?

 

My first experience of debt collection came as an 11-year-old lad tramping the streets of many council estates in order to collect the money for the milk that I had delivered weeks before.

Of course, I didn’t know then, that this hands on approach would serve me well in the 40 odd years that I have since worked in the debt collection industry!

Collecting money goes back a long way. In ancient civilisations they would force debtors, their wives and children into debt slavery until the creditor recouped their losses through physical labour. Thankfully things have changed for the better but it is still a massive challenge for small businesses to keep on top of this problem.

Small firms currently account for around 99 per cent of all private sector business in the UK. Managing cash flow is the biggest single factor in the demise of those businesses so debt collectors still play a very important role in keeping the wheels of industry turning.

Basic

There are still a lot of basic rules that can be applied before the business necessarily needs the services of a debt collection agency. For example, it is crucial that clear payment terms are not only included in the contract between businesses but also re-emphasised on the actual invoice. 30 days is standard as it ties in with the same terms that most employees are paid and also suppliers. Some industry sectors may impose shorter payment terms

Encouraging customers to pay online and offering a small discount for prompt payment will u assist businesses in the avoidance of bad debt The same can be said for setting up standing orders with clients that you may have regular dealings with and this is common practice for accountants, who should know a thing or two about finance. Using a credit controller or a bookkeeper who can provide weekly or monthly lists of overdue accounts is also good management practice.

Difficult

If your customer becomes difficult and either won’t pay or is not in a position to pay it may be worth considering using an external debt collection agency.

There are a number of important factors to take into account before instructing a third-party collection firm:

• How long have they been established?

• Have they provided references from customers who have been satisfied with their services?

• Do they have clear terms and conditions?

• Are they charging you money upfront? Not acceptable in my view, the exception being for court fees or disbursements.

• Are the company or their directors, members of any professional organisation? Look for membership of an appropriate professional association.

Settlement

Ensure also that they are not simply a letter writing service, as many agencies are. A pro-active company that will visit your customers to ensure that they are still trading and to negotiate a settlement is essential. An in-house legal department is also useful so that they are also able to institute legal action on your behalf or indeed the issue and service of a legal notice known as a statutory demand which is a very useful tool for undisputed debts

Finally, be advised that they need to be working in partnership with firms of lawyers so that any complicated or disputed case can be effectively dealt with either through professional mediation or through the county court system.

A collection agency is more relevant now in 2015 than ever and can provide an excellent one stop shop for any accounts that go beyond your normal trading terms.

Kerry Bland

Director of Jack Russell Debt Collection & Legal Process Servers

 

 

Legislation Update : The Late Payment of Commercial Debts Regulations 2013

Legislation Update:

The Late Payment of Commercial Debts Regulations 2013

United Kingdom: Late Payments: EU Directive Implemented
08 April 2013
Article by Brian Cain
Taylor Wessing
5 New Street Square
London EC4A 3TW

In relation to contracts concluded after 16 March 2013 the rights conferred
on creditors by the Late Payments of Commercial Debts (Interest) Act 1998
have been given a boost by The Late Payment of Commercial Debts Regulations
2013 which came into force on that date. The new regulations implement
Directive 2011/7/EU of the European Parliament and of the Council of 16
February 2011 on combating late payment in commercial transactions. Broadly
speaking the Regulations specify payment periods for contracts for goods or
services, by providing that interest on outstanding payments starts to run
after certain time periods depending upon when the goods or services are
delivered or the relevant invoices received. In the case of contracts with
public authorities interest will begin to run after 30 days and for
contracts with other entities the relevant period is 60 days. Knowing the
detail of these new regulations will help any suppliers who have not
expressly provided for default interest in their terms and conditions.

The content of this article is intended to provide a general guide to the
subject matter.
Specialist advice should be sought about your specific circumstances.
Specific Questions relating to this article should be addressed directly to
the author.

Posted by: Ian (D. Withers)
Past Chairman & GC Member

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