When you are the designated expert and responsible for managing vital unsecured Domestic and International debt: How can you do everything in your power to make sure these customers are paying on time? How can you ensure there is better credit control in these business relationships?

What Makes the Perfect Credit Manager

Having a proactive credit management style is what will effectively protect proceeds both domestically and internationally. This means achieving this with clear communication; streamlined processes; and routines that are well established and always followed. It all boils down to having effective credit and A/R management processes in place to not only reduce the risk of bad debt; but also save money on debt collections. The perfect Credit Manager understands client and country-specific needs (VAT treatment, supporting documentation, etc.) and, monitors and reports on team performance to enable continuous improvement. By taking this more proactive approach, this eliminates many of the problems associated with late payment and loss of profits.

Establishing Comprehensive Credit Controls to Minimise Vulnerabilities

A proactive credit manager:

  1. Closely manages and monitors unbilled revenue and missing data, to enable more timely invoicing while also ensuring the accuracy in billing.
  2. Creates SMART objectives for his/her team. For example, a specific, measurable goal would be: “In order to help control bad debts to < 25 % of total sales, the collection department should call every account within ten days of becoming past due.”
  3. Incorporates processes and guidelines for key Accounts Receivable routines (eg how to make account notes following discussions with customers) to drive better communication and establish some consistency.
  4. Analyses the Accounts Receivable Ageing Schedule and reviews aged debtors on a weekly basis to readily identify the root of any potential cash flow problems. This helps ensure that aged debt remains within agreed targets.
  5. Uses analytics to maintain an accurate forecast of receivables and provides weekly billing and debtor summaries to business teams. This increases communication and helps build positive relationships.

Monitoring Customer Account Activity

If you conduct regular credit checks on your main customers and look out for any debtors who are over due by 90 days (unless within agreed credit terms); this lets you know that these accounts may demand some attention. If you wish to carry on a relationship with a customer in this position, it is a good time to try to understand their payment and credit issues. If they are open and honest about their situation and committed to maintaining a relationship with your company, there might be a way to negotiate repayment plans. When you regularly monitor customer activity, this gives you a good overview of all your customer accounts so you can look into who your riskiest customers are. Once you know who is paying you the slowest or, who has stopped paying you altogether, you can begin your collections strategy.

Prioritising Collections

Using strategic predictive analytics is an efficient and cost-effective way to prioritise your collections efforts. This allows you to target the right debtors at the right time, with the right communication strategies. With predictive analytics, you can:

The Final Outcome

Sometimes when you have taken every available measure to effectively manage these debts and minimise vulnerabilities; there is still a chance that you are unable to retrieve payment. This is the time to coordinate with sales and other departments/divisions on the best ways to handle and resolve these disputes. This means possibly stopping supplies of goods to late-paying customers or starting legal action to recover these debts. A Business Debt Recovery Solicitor is a good option here because they can send a formal letter to a customer(s), which is usually effective. In this letter, they detail what the debtor owes with a set time period in which they need to pay. It’s also a good practice to have a Solicitor on your side when you are trying to recover money from a customer who is not only in a different time zone; but also has different laws and customs to abide by. When this is the only option left, you shouldn’t feel guilty about using these services to collect a debt because ultimately, trust is broken. As a business, they owe you this money for the goods or services you provide. 

The Government has published their proposals to require large companies to publish their performance when it comes to late payment. This comes after repeated surveys show that UK business is still dragging it’s feet when it comes to paying invoices on time – one recent survey showed that 39% of all invoices issued in the UK are paid outside of terms.

Late Payment is more than just an irritation – it can cause real problems for many smaller businesses who rely on prompt payment and a regular cycle of cashflow to be able to pay their own bills. As a result, the Government announced back in 2014 that it would set up a public register to “name and shame” late payers. Over two years later, it looks like this is finally about to become a reality.

What exactly are the proposals and who will they affect?

In short, the Government is requiring businesses to publish information about their payment practices. These will be publicly available on a website, allowing anyone to see at a glance whether a particular company pays their invoices on time or not.

The first thing to note is that the reporting requirements only cover medium and large businesses. This is defined as any company that meets at least two of the following criteria:


Those eagle-eyed accountants among you may have noticed these criteria are the same as those used in the Companies Act to define a medium sized company, and it is expected they will change in step with any changes to the definitions in the Act.

What needs to be reported?

Once a company falls into this category then from the second financial year on wards (so not the year in which they exceed the thresholds – there is one years’ grace) the company must report twice a year on the following information:

How and when should this be reported?

There’s less detail at the moment on exactly how this will be reported. The Government have stated that there will be a webpage on the existing www.gov.uk site where this information will be shown. However at this stage they haven’t said if there will be an automated way to upload this information or whether it will need to be manually entered.

What is clear is the frequency of reporting. Every qualifying company will have to provide the reporting information twice a year, within 30 days of the end of either the first half or the second half of the company financial year for payments made in that six month period.

So, for example, if a company has a financial year running from April 1st – March 31st then they will need to report on all payments made on invoices between April 1st – September 30th no later than the end of October, then again on payments made on invoices between October 1st – March 31st no later than the end of April.

The reporting requirements start for financial years beginning on or after the 1st April 2017, meaning any company with a financial year 1st April – 31st March will have to make their first report in October 2017.

Will this work?

At Lovetts we’ve been arguing for many years that action needs to be taken to improve the culture of late payment within the United Kingdom. We welcome the Government initiative as a long-overdue start to the process of increasing transparency on this issue.

At the same time the devil will be in the detail. Currently the reporting requirements only seem to cover invoices that have actually been paid, meaning the resulting stats could actually end up hiding problems where companies simply aren’t paying invoices, or where invoices that are already late coming up to the end of the reporting period are ‘held over’ so they don’t appear in the stats for that six-month period.

This could be resolved by ensuring that the new Small Business Commissioner is empowered to investigate complaints about inaccurate reporting and require an independent audit where the Commissioner believes that data is missing or is being misrepresented.

Another potential issue is that the new rules only apply to medium and large businesses. Although clearly this is where the late payment problem is most acute (particularly where the supplier is a small business), given that less than 2% of businesses in the UK are classed as medium or large (albeit they represent about 2/3 of business turnover) there could be a significant gap in the data reported under this new initiative.

What other options are there?

It’s worth noting that the idea of publishing payment performance information is not new. Credit reference agencies have collated this data for a number of years, and sites such as the Prompt Payment Directory have also provided a valuable resource to individuals and businesses who want to know more about the payment habits of their prospective customers, allowing suppliers to rate their customers and provide information about their payment habits. Given the official Government scheme only covers medium businesses and does not allow for contextual information such as the reason given for late payment of specific invoices, there will always be a valuable role to be played by such alternative offerings.

Also, although “name and shame” can often be a powerful tool, there still remains the fact that every late payment will have a real impact on the bottom line of the supplier who has not been paid, and in those cases the supplier won’t be particularly interested in the reputational issue of their customer six months down the line – they want payment now. In such cases the use of specialist debt recovery solicitors such as Lovetts to collect the outstanding debt will continue to be the best way to actually recover the outstanding monies.

Overall, however the Government’s action is to be welcomed. Here at Lovetts we will monitor the success of the new initiative and provide feedback both to Government and to our clients as we see how it works in practice.

Running a business involves overseeing diverse business operations, including sales, marketing, HR and benefits, accounting, customer service, risk management, and business development. Each aspect of business administration includes its own best practices, some of which consume more manpower than others.

Within the accounting function of a company, there’s the need to shorten the life cycle of accounts receivable, which, after so many months, accumulate as bad debts on a company’s books. Here, we look at how a good debt collection partner will help grow your business, especially by reducing your debtor days: 

1. Practicing the right amount of prevention

Avoiding financial exposures due to customers who don’t pay up their debts owed to your company begins with prevention. You can work with an outside business partner to assess the risk of a new customer before opening a credit account. This includes checking the credit rating of your customer and considering other factors. One of the key factors is a credit controller’s experience and his or her gut feeling about a customer when it comes to offering credit. 

2. Providing credit with restrictions

An alternative to turning down high-risk customers is to offer them credit with restrictions. A credit controller helps the company manage the risk of offering credit by mitigating each situation with tight credit control. The higher risk customers are usually fewer and are offset by customers with a good credit rating. 

3. Dealing with the pressure to relax credit restrictions

As your company grows, you want to take on more customers, and you may find that the pursuit of growth includes internal pressure to relax the criteria that your company uses to take on new customers, including how their risk factors are assessed before they are offered credit. The result could include accepting higher-risk customers with a questionable degree of creditworthiness. You want to weigh the advantages of expanding your market to those customers with the risks that they won’t pay their debts. 

4. Being realistic

Generally, relaxing the credit criteria for a segment of high-risk customers will not cause a significant problem and your company will experience growth. However, it’s important to have an element of security and a reliable debt collection partner to assist your accounting staff. When it comes to collecting aging debts, this kind of partner shares the workload, which may offset the stress levels of your accounting people as your company handles a higher volume of customers. 

5. It should not cost you more

Working with a debt recovery partner should not increase your costs. If the debt recovery partner is experienced and you utilise legislation and contractual clauses, you will be able to recover any costs from the debtor. 

6. Retain control

If you refer your debts to a third party debt recovery firm, it does not mean you have to lose control. At Lovetts, we offer clients CaseManager, an online portal that gives you an opportunity to retain control of your debts. CaseManager allows you to view case information, download copies of all documents sent and received by Lovetts, and manage all aspects of the legal work 24/7. It allows for complete transparency together with a dashboard containing key performance indicators.   

7. Be robust

With higher-risk customers for whom it becomes apparent that cash flow is an issue, your collection partners can act swiftly and robustly. For example, a draft winding up petition could mean that your company will shout the loudest amongst all of the creditors your debtor has and therefore get paid first. In order to grow your company, you want a steady flow of customers purchasing your company’s goods or services, but not at the cost of giving them away for free to those who don’t pay their debts. We have worked in partnership with many companies helping facilitate its next phase of growth by collecting their debts quickly and cost effectively. A good debt recovery partner should be able to do the same for you.   

Get your demo login and check out how CaseManager gives you complete control over your cases – 24/7

•  Issue instructions at every stage of a case
•  Instruct on payments, credits and write-offs
•  Receive prompts when your input is required
•  Discuss cases via internal messaging system
•  Comprehensive reporting
•  Download case documents (letters, email, etc)

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Whether you are a business owner, accounts receivable manager or credit controller tasked with pursuing unpaid debt, it can be a nuanced and challenging endeavor. Not only do the debts collected impact the company bottom line, but the care with which recovery is handled can affect the company’s reputation, customer retention and future customer acquisition. 

An array of skills and knowledge is critical to the adept negotiation of the company’s financial interests versus the interests of the customer. That said, a key element to be aware of when negotiating those factors is that time impacts on the chances of successful recovery of delinquent commercial and business-to-business debt. Generally, business debt recovery involves collecting monies owed from three types of customers and clients: 

There is hope of recovery in the latter two categories of non-paying clients. After all, they have a history of making full payments, and therefore they may be convinced to make a full or partial payment. However, the first category of customers – those who will do everything within their power to evade paying – demand fast and determined action. Invoices and demands for payment should be sent promptly, frequently and with regularity. Once these customers are identified, it would be wise to consider bringing a third-party debt collection company into play.Once engaged, your debt collection partner will handle all correspondence and legal processes, taking the burden off of your shoulders. The first step taken usually involves a letter before action, which is an initial communication that often results in voluntary payment by the debtor. Generally a letter before action will: 

On average 86% of debts will be paid by the debtor when they receive the letter before action. If the letter before action is returned marked “gone away”, Lovetts often utilises trace agents to locate the debtor and even establish any assets the debtor may have. Further, third-party debt collectors should provide easy-to-use tools and technology to expedite commercial debt payment, streamline collection processes and free up time for allocation to more valuable areas. Specialised platforms, targeted analytics and technological expertise can assist in achieving a more efficient collections practice, a reduction in aged debt and a reduction in overall operating costs. It is critical to take a proactive approach to debt recovery and to not put off collecting on unpaid commercial and business-to-business receivables. Whether pursuing unpaid invoices internally or outsourcing to a professional debt recovery firm, it is important to remember that time is of the essence. The longer collection efforts are delayed, the less likely it is that payment will be made. Studies have demonstrated that the length of time that a business debt is outstanding is inversely correlated with its collectability, and that the probability of collection decreases at an exponential rate across time. Consequently, it is critical to an organisation’s bottom line that timely action be taken on unpaid commercial receivables.


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If you are in business long enough, the need for a debt collector will become inevitable. When it is time to collect on unpaid debts, you can eithertry to handle everything yourself or outsource your collection efforts to a third party. A third-party debt collector is never cost effective…or is it? You may be surprised to know that outsourcing can be more cost-effective for a number of reasons. 

Save Money on Personnel

Many people hesitate to use a third party because they believe that doing so will not be cost effective. If you are one of them, you may be surprised to know that outsourcing can actually help you save money because you will not need to hire someone to take care of collections for you. Not only can you save on the cost of salary, but you could also realise other savings by:  

Cost-Effective Service

There also seems to be some misconception about the cost of using a third party such as a debt recovery solicitor. Most solicitors collecting debt should offer a clear fixed fee service. At Lovetts, we have also sought to utilise legislation and contractual clauses to ensure these fixed costs plus our clients in-house credit control costs, are paid by debtors. It is important that companies do not lose money when they seek to collect money that is rightfully due to them.  

Saves Time

By far, the biggest benefit to using a third-party debt collector is the fact that it saves you time. When you save time, you also save money because: 

Positive Results

When a third-party is a specialist in debt collection, you can be sure your collections are in very capable hands. Like us they can put the experience and knowledge they have gained over the years to good use, ensuring the amount you recover remains high and that there is little debt left over for you to write off. It is also extremely important that the debt collection service more than pays for itself in the long run through the recovery of your costs. Too much uncollected debt can essentially make or break a business. Don’t leave your debt collections to chance-instead, consider outsourcing this function to a specialist debt collector. You’ll rest easy knowing you are collecting as much unpaid debt as possible in a very cost-effective, efficient manner. If you would like to know more about how you can recover your costs, do not hesitate to contact us.

Is chasing late payments getting in the way of your other business priorities? Our handy free guide will provide you with 10 tips and insights to help you reduce those issues.  DOWNLOAD FREE 

The month of December is the most pivotal month of the year for many companies. With many companies closing their doors between Christmas and New Year’s Day, year-end payments are often not processed until mid to late January. This can create a major strain on businesses struggling to maintain sufficient cash flow to cover expenses that must be paid by the end of the fiscal year. Below is a look at the challenges facing businesses in December and five steps to help increase your cash flow at Christmas. 

The Importance of Healthy Cash Flow During the Christmas Period 

December is full of extra expenses that companies do not have to face during the other months of the year. In addition to standard payroll, businesses face a host of other expenses that can strain a company’s finances. Below are three key reasons why companies must ensure that they have a healthy cash flow during the Christmas period:  

Steps to Optimizing Your Cash Flow at Christmas 

Optimising your cash flow is a process that cannot be accomplished in one day. You need an early start and a well-orchestrated plan of attack. Below are five steps to help your business successfully collect payments prior to the Christmas period.  

1. Begin to follow up on outstanding receivables as early as possible

Do not wait until the week before Christmas to swing into action, or your requests for overdue payments may not receive a response. By mid-December, many people have begun their holiday vacations and do not resume business until after the start of the new year. Initiating collection of outstanding payments as soon as possible gives you a jump on other companies collecting from your clients and gives your customers plenty of time to make payment arrangements.   

2. Proactively target customers with a history of delayed payments 

Do not be afraid to be proactive – especially with clients who tend to be late remitting payments. Most businesses have a small handful of customers who are responsible for the majority of their outstanding payments. Failure to collect from these customers prior to Christmas can delay your receipt of payment until the second half of January or later.   

3. Offer incentives to customers who pay in advance

Customers with perfect payment records are not the norm, yet are often taken for granted by businesses. Christmas time is the perfect time to show your appreciation to customers who pay upon placement of their order. Extending discounts to customers who remit payment in full when they confirm their orders is beneficial to your company because cash flow increases. This strategy is also advantageous for the customer, who is able to enjoy year-end savings.   

4. Send a letter before action by email

Letters Before Action (LBAs) are a cost-effective way to prompt customers to remit payment. LBAs sent by email tend to produce better results than LBAs sent by post because customers receive them faster. Additionally, LBAs sent by email tend to be paid faster compared to those sent by post. Customers are rarely offended by the receipt of an LBA and we have found that roughly 84% of customers pay their debts upon receipt of an LBA. 

5. Seek the guidance of an experienced debt recovery specialist

The best way to approach debt collection is to enlist the support of a specialist debt recovery firm. A trusted firm will help you manage your receivables from start to finish, helping you to eliminate cash flow concerns.   

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At Lovetts we’ve been awarded the Law Society’s top accolade of Lexcel Accreditation for our personal and business debt recovery services. The status was conferred by official inspector, Roger Newman, who wrote in his Annual Maintenance Visit report that we had achieved the “very rare” distinction of evidencing zero non-compliance with professional standards. The inspection focused on seven key practice areas including financial management, people management, risk management and client care.

Among other things, Mr Newman praised the client-centered ethos within our organisation, saying: “The company remains people-focused and client-focused through its defined People First strategy“.”The company values continue to underpin good business practice and good customer service throughout the organisation“. He added. The inspection took place against the backdrop of considerable growth and the recent appointment of Michael Higgins as our Managing Director. Following the report’s publication, Michael Higgins said: “Of course I’m pleased, but I have to say that I’m not greatly surprised by the result.” “I witness the high ability and professionalism of our staff every working day, so although this was an inspection it was essentially business as usual.” The Law Society’s high praise and formal Lexcel Accreditation mean we maintain our position as one of the country’s top business debt recovery solicitors. 

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Imagine this situation: a sales person has skilfully closed a high-value deal, only to allow the customer to dictate payment terms at the last minute. Oooooops…Believe it or not, this can happen quite easily if sales people fail to state payment terms at the critical moment the deal is struck, enabling the other party to do so instead… It’s all to do with the ‘last shot wins rule’, which says the party that had the last say in negotiations ultimately defines the terms. As a result, if the deal does eventually result in a payment dispute, then a Court of Law will look at the nature of the preceding correspondence to help it infer the correct terms. 

This kind of payment dispute often leaves credit controllers to pick up the pieces, costing organisations time and money that could be better spent elsewhere. And who needs that kind of hassle? So what can you do to help protect yourself against a dispute related to payment terms? That’s right, as the title of this blog says: you should aim to include payment terms at the end of all your correspondence. 

This fail-safe strategy isn’t a big deal at all… In fact, many companies simply include full payment terms in their email footers as a matter of course to guard against payment disputes arising. It’s just one small tip that could save you problems with payment disputes in the future. So why not use it…? Nobody will think you are being unreasonable – it’s just good practice in today’s fast-paced working environment. 

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Recovering overpayments to former employees can be an easy process that need not result in large legal costs. To illustrate the options a company may have, let us consider a recent case. 

The Parties

In this case, a former employee of an award-winning outsourcing company based in London was overpaid in excess of £8,000. Unfortunately, the company did not discover the overpayment until after the employee had already left their employment. In preparing its annual accounts, the company became aware that the former employee had been overpaid and became concerned that the money would not be recovered. The company consulted Lovetts to determine its legal options to recover the salary overpayment to its former employee. 

The Challenge

Lovetts informed the company that they were entitled to recover the overpayment from the former employee. However, the company was facing a former employee that was refusing to engage with no certainty as to whether they had the current address for the former employee. 

The Solution

Lovetts were able to trace and confirm the former employee still lived at the address the company had on record. Accordingly, Lovetts sent a letter before action requesting the return of the salary overpayment. The former employee failed to engage with Lovetts and did not respond to the Letter Before Action. As a result, Lovetts promptly filed a claim for the amount of the overpayment plus legal costs and interests. The former employee filed a defence alleging that she had never received correspondence from her former employer or Lovetts notifying her of the overpayment and that she was completely unaware that she had received an overpayment. The former employee further stated that because it was her employer’s mistake, she was not liable to return the overpayment in any event. Lovetts were able to respond and present a clear paper trail which included all previous demands from the company to the former employee. It also clearly set out all payroll records showing the overpayment that had been made and received by the former employee. The Court accepted the evidence showed an overpayment and rejected the defence that former employee was not required to return the overpayment due to the Company making a mistake. 

The Outcome

The Court ordered the former employee to return the overpayment of salary and to also make payment of the legal costs and interest. The former employee subsequently made payment of the Judgment amount within 14 days of the hearing and avoided enforcement action.  

Having overpayment issues?
If the overpayment has been made to a current employee, you have certain rights under the Employment Rights Act 1996 to deduct the overpayment from the next payroll process. However, what happens if the overpayment relates to a former employee? The first step is to write to the former employee requesting payment of the overpaid sum. If you are not sure what to include in your letter, please download our free guide which provides you with template letters.

Overpayment to employees, in particular former employees, is more common than you think. It can range from a simple payroll error such as miscalculating a payment of wages and or bonus/commission to seeking recovery of holiday pay, benefits such as a car allowance or train season ticket and even training fees from a former employee.

If the overpayment has been made to a current employee, you have certain rights under the Employment Rights Act 1996 to deduct the overpayment from the next payroll process. However, what happens if the overpayment relates to a former employee? The first step is to write to the former employee requesting payment of the overpaid sum. If you are not sure what to include in your letter, please download our free guide which provides you with template letters.