Unless you are a business that takes payments up front for your product or service you are likely to have an unpaid bill or invoice at some point. Maintaining a good cash flow is often a challenge, but absolutely essential for the growth and success of every business.

The job of recovering unpaid invoices typically sends most people in to a cold sweat and invariably gets pushed down the ‘to do’ list until it fails to make it on to the list at all and gets forgotten.

Why is this - and what are the barriers?

One of the main reasons for failing to pursue an unpaid invoice is a lack of resources or suitably trained staff to deal with this task. We frequently see this job being passed down to a secretary or receptionist who has been offered little or no training and typically does not have any background in debt recovery or speaking to customers in this regard. The job of debt recovery requires a certain set of skills and a junior member of staff may simply make a quick phone call or send a standard letter which might not be enough to provoke payment.

Another main reason debt recovery is overlooked is the fear of losing a customer or having that customer “bad mouthing” your reputation.

Far too many companies fail to understand how a good debt recovery procedure can help your cash flow, reduce stress and only result  in a loss of a customer when YOU decide. Everybody has to reach a point where you draw a line in the sand and say future business with this company or individual is too risky. It is important that within your debt recovery procedure your staff understand what that trigger point is.

What is a good debt recovery procedure?

The first and most important thing is the accuracy of the customer details. When setting up an account or starting a quote for a job think of what information you may need at the end of the process should they decide not to pay. This may sound obvious but includes things such as:-

  • A full postal address including unit or house number
  • A full name or names of those who are being billed
  • Senior personnel not just a company name
  • Landline, mobile phone numbers and email addresses
  • Date of birth (if appropriate) and if you can’t obtain a date of birth a rough age can be really helpful when trying to trace someone where father and son have the same name.

Depending on the type of credit being offered, you may wish to run some of your own checks as to your customer’s ability to pay or some sort of address verification. We might be able to help you with that.

One of the biggest and most frequent issues when recovering unpaid invoices is a lack of communication early on in the process. We have been amazed over the years how many companies fail to set out at the point of sale or quotation their payment terms. A customer will always think they have 30 days plus and a kitchen fitter for example might be expecting payment on completion. This misunderstanding is often the flash point for what turns in to a breakdown in customer relationships and potentially non-payment.

Establishing a procedure is simple enough, you need to allow for an escalation from “gentle reminder” to “final notice before court action” and set out how many letters you feel are appropriate. Will you supplement these letters with text messages and emails? Both of which are rapidly becoming an essential part of any debt recovery process. Over what period are you prepared to send these forms of communication before passing it to your solicitor or an enforcement agent?

Sending random letters with vague threats of further action will prod the odd person into paying but for your more hardened non payer they will quickly learn these are typically empty threats and in our experience won’t generally pay until a third party specialist is involved. Much of this is down to client relationships, you spend a lot of time and sometimes money building client relationships and your late or non-payers will play on that relationship giving never ending excuses and promises to pay.

Create an effective debt recovery procedure tailored to your exact needs and stick to it!

Can I take someone to court and will it cost the earth?

The judicial process in this country is pretty easy as long as you can demonstrate the debtor has been given time and notification to pay. Whether you do this yourself via Money Claim Online (www.moneyclaim.gov.uk) or via your solicitor obtaining a County Court Judgement (CCJ) it is straight forward. Court papers are issued to your customer, they have 28 days to pay or they get a chance to stand in front of a judge and present their case. If after this the judge is satisfied your debt is due and the debtor has still not paid a CCJ is awarded  and you can then instruct a County Court enforcement agent or for a small court fee (currently £60) the case can be transferred to the High court for enforcement and allocated to one of our High Court Enforcement Officers to oversee the enforcement process. This is likely to be much quicker, and, in our experience will be more proactive as we have access to software for tracing, address verification, asset checking and investigation work.

But is that a little heavy handed?

Since April 2014 all enforcement action now comes under, and is regulated by, the Taking Control of Goods Regulations 2007 and requires a Notice of Enforcement letter to be issued to the debtor giving them 7 clear days to contact the Enforcement Agent with an offer to pay before the enforcement agent attends. This 7 days does not include the day of posting, the day of delivery or bank holidays so in reality it is 10 days plus before any door step enforcement action can commence.

Should you require help setting up your own debt and Invoice recovery procedure or would like to know more about the best debt recovery solution for your business we offer a free no obligation consultation and free training.

Contact alan.wood@penhamexcel.co.uk.

Or visit our stand at LAWBizTech Show at London Olympia on the 25th & 26th October 2016.

www.penhamexcel.co.uk

Tel: 07825 971799

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