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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.


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.


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.


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



3 Debt Collection Terms Explained

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.

How Credit Controllers should control

 “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.

3 Legal/Debt Collection Terms Explained

1) County Court Judgment (CCJ.) – A CCJ is a legal document that is obtained against the debtor after legal action has been taken. This document enables enforcement to be carried out.

2) Sheriff Fee. – A Sheriff Fee is an enforcement fee taken by a Bailiff, following a Judgement to obtain goods to the value of the Judgment debt.

3) Affidavit. – An Affidavit of Service is carried out in court and under oath. The Server of legal process testifies their service.


What is a Statutory Demand?

Statutory Demands are one of the most useful tools in recovering debt. A Statutory Demand is a formal, legal demand of payment being fulfilled within 21 days of the demand being served. They are also a warning of consequential action if the debt is ignored. Consequences such as legal action, the winding up of a company or even bankruptcy generally ensure swift payment of the debt in over 80% of cases. It also informs the debtor of their right to dispute the demand, and who to pursue if they wish to do so.

I am owed money, Is a Statutory Demand suitable for my needs?

–          Due to the Statutory Demand having the option of dispute, they can only be used to resolve previously undisputed debts.

–          A statutory demand comes at a serving cost, so they are suitable for debts over £750, but more realistically suited to debts over £2000 to ensure financial benefit.

–          Statutory Demands apply only to England and Wales as Scotland practise different legal procedures.

“Yes, they owed me over ten grand. They paid up though, after a Statutory Demand”

-Kerry Bland.

 Ensure the Statutory Demand is personally delivered, preferably by an experienced Legal Process Server (such as Jack Russell!) to avoid any potential problems later down the line.

What do I do if I’ve received a Statutory Demand?

–          If you have received a Statutory Demand, you have 21 days (or 28 if you live abroad) to satisfy the demand. – The demand can either be paid in full or an agreement can be put in place if you wish to pay in instalments.

–          If you wish to dispute the Demand, you have 18 days (or 22 if you live abroad) to do so.

DO NOT ignore it. Ignored Demands can have serious financial consequences to you or your company’s financial health.

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