When you call Jack Russell for help recovering a debt we will ask you for your trading status. Most commonly we ask you, ‘are you a Limited Company?’ Read our guide for help answering this question…
Limited Companies (Ltd).
- A Limited Company is the most common type of company in the UK.
- The company must trade with their full name, including their trading status of Limited or ‘Ltd’.
- They must be registered on the Government website, ‘companieshouse.gov.uk’ with their unique company number, which cannot be changed.
- ‘Limited’ means that the Shareholders or Directors of the company have limited liability for the company’s debts in the event of dissolution or liquidation. The shareholders are only liable for their own capital and not company debts.
Public Limited Companies (Plc).
- A Plc requires a minimum of two Directors.
- The Directors are again limited to liability of their own capital only.
- The company’s shares are freely sold and traded to the public, if you have bought shares in a company it’s most likely to be a Plc.
Limited by Guarantee.
- A company that is Limited by Guarantee is most often a charity or a non-profit organisation.
- This type of company has no Shareholders or share capital.
- The Directors are only liable for very small amounts of money that they usually have contributed themselves.
- A Partnership requires two or more people to be Partners.
- The Partners share everything equally, including liability, profits and losses.
- This means that unlike a Limited Company, the Partners are equally liable for company debts.
- A Partnership is easy to form and operate and doesn’t require Government registration.
- Partnerships enjoy tax benefits as the partners are only taxed on their own income and not the company profits.
Limited Liability Partnerships (LLP) and Limited Liability Companies (LLC).
- LLPs and LLCs are very similar in terms of tax and liability. Both types are governed by laws or acts, such as The Limited Liability Partnership Act (2000). The biggest difference between them is that LLPs are generally restricted to professionally licensed individuals such as Lawyers and Accountants, whereas LLCs can be formed by any business or persons.
- Thanks to liability being limited, both LLPs and LLCs provide liability protection. This makes LLPs a very beneficial type of Partnership as Partners are not equally liable for debts. LLPs also offer legal protection against the actions of another Partner.
- LLCs benefit from only paying tax on the incomes of the Directors, unlike a regular Limited Company and alike to all kinds of Partnership.
- Sole Traders have sole proprietorship and sole liability.
- Only one person in the business, commonly a Landlord, Tradesman or Self-Employed person.
- Does not require any type of company registration, also you must register with the tax office to complete your own tax return.
- Easy to form and operate, you are your own business.
So which one are you?
1) Make sure your terms and conditions are watertight.
You terms and conditions need to be regularly kept up to date, and preferably reviewed by a Solicitor. Ensure that your customer has a copy of these terms before you conclude with your contract. It is not advisable to simply attach these to your invoice, unless you have already sent them at the point of contract. Also ensure that you have a clause within your terms to legally add on any debt collection charges should you have to outsource your account to a Debt Collection Agency and then it will be your customer that has to pay such costs rather than yourselves. Make sure that English Law applies in the event of any dispute, or Scottish Law and if you are based elsewhere, the relevant law for your Country. If you are in any doubt at all, Jack Russell and our Solicitor Partners can check these terms and conditions for you.
2) Accurate credit checks.
It would be extremely unwise to give customers credit without actually checking the amount in the first place. Either, sign up with a reputable credit reference agency as this could save you thousands of pounds in the long run, and if the credit risk score is particularly poor then only deal with such customers on a cash only basis or via credit card transaction. Also check that you are not dealing with a Company that has Directors which have been involved with a previously failed Company as this again would be extremely risky. Know who your customers are as well, for example Jack Russell Limited or Mr Jack Russell and Mr John Russell t/a Jack Russell Associates. These are examples of two types of business where one is a Limited Company and the latter a Partnership. You may also be dealing with a business which is a Sole Trader or Sole Proprietor.
3) Is your invoice accurate?
Make sure that you show your terms of payment clearly on your invoice and also quote if you have retention of title to your goods. This is particularly applicable to businesses who are supplying goods rather than services. Ensure that your Company’s registration number is quoted as well as the VAT registration number so that the validity of your invoice cannot be challenged on these points.
4) Effective credit control and telephone follow up.
Always telephone your customer once your invoice has been sent out to make sure they have received it so they cannot use this as an excuse for non payment. Make sure that you have the contact name of the customers Director, Credit Controller, or the person responsible for signing their cheques and authorising payment. Have a properly structured telephone follow up system. Suspend the customers account as and when necessary, although do try and maintain good relations as far as possible. Do you really want to have a customer who pays you regularly way after their normal terms and have caused you a lot of time in the chasing thereafter? Perhaps they would be better off working with your competitors!
5) Statutory Demands.
These can be extremely useful with debts that are undisputed and are over £750. It is important however that they are personally delivered rather than just sent by Royal Mail so that there can be no dispute over whether the demand was actually received by your customer. This is where experienced Legal Process Servers are both a necessary tool and are extremely cost effective – Jack Russell can provide you with such a service on a Nationwide basis for generally around £75 – £95 + VAT.
6) County Court Proceedings.
Again, it is worth running a further credit check before proceeding to such action just incase your customer has already become insolvent. Furthermore, although such action can be taken online we would encourage you to use your local County Court service, not only to try and preserve some of the local courts that are fast going out of existence due to government cuts, but more importantly that from our experience they provide a much better and reliable service. Make sure you include not only the Statutory or Contractual interest that you are entitled to within your claim, but also the appropriate compensation fee under the Late Payment Act. Jack Russell can once again assist you with all of these tasks.
In summary, it pays to have a proper and effective Credit Control and Debt Collection system in place. If you have any further enquiries, please contact us on the above number or alternatively via email on firstname.lastname@example.org.
Not many small businesses can handle erratic cashflow. Cashflow is the lifeblood of any business since this is the oil that keeps the engine of manufacture or supply alive. And with so many businesses on the edge during the current economic downturn making sure that you get payment for your goods and services on time is vital for you to stay alive.
Whilst trade credit has become common amongst suppliers there is no reason for any business to be starved of cash with proper forecasting, funding lines and an efficient and effective debt collection team. But how many businesses actually want to specialise in debt collection? Surely the main aim of any business is to manufacture and sell or provide services for a price that makes money. Unless your core business is debt collection it can be hard taking time away from the core operations to make sure you get paid on time.
And this is where many companies turn to professional debt collection agencies for help.
There are many levels of service available to help small businesses stay on top of their debtors. Although there is no substitute for having a small credit control person or team looking after the raising of invoices and cash allocation getting expert help to focus on collecting cash can be a real bonus. Specialist agencies have staff that are trained in the latest techniques and use the very latest software to help them track down and collect from past due customers.
If your account is big enough you can even get a tailored service designed to seamlessly fit your business so customers are not aware that they are being contacted by an external agency. Even smaller companies get the benefit of trained competent collectors chasing their debts and usually on a no recovery no fee basis.
One thing that specialist organisations that focus on debt collection have is slick procedures and reporting. They will never miss a scheduled activity or phone call so customers cannot use age old excuses of not being contactable. Personal visits can also be arranged if necessary.
Another advantage of a specialist agency is that they can collect monies in a variety of ways. CHAPS, BACS, credit or charge cards as well as cash can be accepted where your business may not have the capability to process at cost effective rates. And they will chase all the way to insolvency if necessary ensuring that some recovery is made in virtually every case.
So there should be little need for your business to become a bank and fund others at cost to yourself. Outsourcing some or all of the credit collection process can add value to the business at a relatively small cost. Your reputation as a no nonsense operation will also spread amongst your clients helping to generate higher on time payments.
Finally, customers realise that whilst they may be able to mess you around in the hope that you will see further new business opportunities, they cannot do that with a professional debt collection company.
Choosing a credit collection company is like making a credit card comparison – there are lots to choose from so taking time to find one that has the right ethos and fit for your business is worth the effort. Once established, the long term relationship should yield dividends and take a considerable burden away from the business.