Credit control is one of the many components needed for an effective business model, but implementing an effective credit control process can be a difficult task. At Lovetts, we work with professionals in this area every day, and here we look at some of the key strategies for success.

Research current and new clients

Research is pivotal in credit control because it allows a business to assess the risk that an existing client or prospect could pose in terms of making payments. Resources like Experian Business provide full credit reports on any business that allow credit control professionals to assess the risk. These reports allow you to gain clarity into who you’re doing business with, and if they have a history of bad credit and payments.

 Act swiftly

Ensuring invoices are paid in a timely fashion can become an art for many credit controllers, in terms of striking the right balance between being proactive versus not wishing to agitate trusted customers.

 There are a few different ways in which you can help to avoid delays:

• Send invoices by both email and post – this way it is more difficult for the client to make the argument that they did not receive it.
• Ensure that details are clear and correct – a more straightforward invoice will be less likely to incur questions around why it was raised, which can also be used to slow down the payments process.
• Include clear payment terms and conditions in the initial working contract. This can then easily be referred back to when required, even directly via a PDF link in instances where electronic invoices are sent through.
• If you do take on a new client that you are unsure about, it is possible to request advanced payment so that this is made before products/services are supplied.

Track and Manage

Keeping track of clients does not have to be onerous. Effective communications – and effective business relationships – are built on trust and transparency. Something as simple as a courtesy call or reminder email could be as much appreciated by your customer as it is at your end. In addition to tracking, you also need to manage the days that debts are allowed to go overdue before further action is taken. It’s a good idea to cultivate an understanding of how different payment amounts and time scales are met and the average time taken by a debtor to pay different amounts that are due. This data will also allow you to prioritise specific invoices and from there you can also consider outsourcing some of your more difficult debt chasing to a third party service provide.

Involve the whole team

One common practice for credit control departments is to put in place written procedures that explain step by step how to issue invoices and what the standard follow-up process for chasing invoices is. It is then much easier for a number of individuals to follow these guidelines and play a proactive part in protecting your business’s cash flow.

The right tools

Finally, finding the right tools to meet your businesses cash flow requirements can be an important piece of the puzzle in effective credit control management. While advanced software is becoming increasingly integral to credit control departments, it’s essential not to over complicate the process and to find the right tools for you. Services that help you to store all invoice communications and histories in one place for example can significantly simplify the process. 

Ultimately, implementing an effective credit control process is about thinking about the entire journey from invoice creation, to client communications, to how to deal with late payments. Lovetts is on-hand to help you with this every step of the way, and you can find out further information here on our transparent and ethical service here. 

A team from Lovetts Solicitors will take part in the Cancer Research Race for Life in July, entering the Guildford Pretty Muddy 5k. The ‘Lovetts Pink Ladies’ (and Danny Zuko) have already begun fundraising for the event and you can view the official team sponsorship page here.

The run will take place at 11am on Saturday 27^th July in Stoke Park, Guildford, and is comprised of an obstacle course as well as (you might have guessed) lots of mud! Every two minutes, someone in the UK is diagnosed with cancer, and all money raised at the event will be used to fund life-saving research.

“As a company we’re always looking for things we can do in the cause branding and social investment fields,” says Sarb Dhaliwal, Legal Manager for Lovetts. “Race for Life is obviously something that’s just a bit more fun, which a number of members of the team probably would have entered into anyway, and doing it this way allows us to do the activity together as a company. We all know somebody who’s life has been impacted by cancer in some way or another, and while other causes might have become more fashionable in recent years, I think it’s important to keep the awareness and the fundraising up around cancer research.”

As the Cancer Research website outlines, just £5 kits out one of the Charity’s ground-breaking research labs with essential chemicals, £20 buys a new bulb for microscopes, and £400 is the cost of running Cancer Chat for one day.

If you would like to donate please visit the official Lovetts Pink Ladies team sponsorship page here.

In the last budget, UK Chancellor Philip Hammond delivered a tax-focused budget announcing plans to make HMRC a preferential creditor in insolvency. It’s a move that comes with serious implications for UK business, most notably in reducing the chances of unsecured creditors being paid from insolvency.

Once a company is ‘Wound up’ all creditors are informed and an insolvency practitioner goes into the business to assesses whether there are any assets available for liquidation. But before creditors can be paid, it’s important to know that there is a strict payment priority protocol in place. Not all creditors are created equal at least in the eyes of the law and, since there is almost never enough money to go around, the process must start somewhere.

The liquidation priority process works as follows: 

1. First in line for the payment is the Liquidator and the costs of their services.
2. Then there are the creditors who had been granted security – like banks, lenders and finance providers. These are called the Secured Creditors.
3. After, and only after, the secured creditors have been paid, preferential creditors such as the company employees can get in line for their payout (and those claims are still subject to certain limits that the government has set in place).
4. After the company employees have been paid, unsecured creditors like suppliers, landlords, contractors and customers can be paid, and crucially for the purposes of this change, the taxman.
5. The last in payout order of priority are the shareholders.

By making HMRC a preferential creditor in insolvency, the Chancellor has effectively jumped the government to the front of the queue, ensuring that in his words, “tax that has been collected on behalf of HMRC is actually paid to HMRC.”

Exactly where the moral high ground sits on this decision is open for debate. On the one hand, companies collect tax on behalf of the government as soon as they begin to accrue revenues. So Her Majesty’s percentage is, in theory at least, only ever resting in company accounts. Conversely, if the government is seeking to reignite economic growth by way of business breaks then you could argue that leaving itself further down the payment pecking order would be a strong, low risk way to help out creditors and facilitate UK business cash flow.

Either way, the newly announced legislation comes into play in 2020, and it’s important that businesses are aware of the full implications of these changes and prepare themselves accordingly.

“Usually in the case of an insolvency payout there is just enough money for the secured creditors,” says Michael Higgins, Managing Director for Lovetts Solicitors. “More often than not the rest don’t get paid and if there is any money left for the unsecured creditors, it’s all placed into a creditors’ pot to be shared out equally. For example, each creditor might receive 10 pence for every £1 of debt.”

“For UK businesses, now is the time to get up-to-speed on your options and make sure you are as buttoned up as possible. For instance, when giving credit to a company consider whether you obtain a Personal Guarantee from a director. This way if a company does become insolvent you can have another chance of getting paid in full, this time from the director personally.”

For the Chancellor, bumping HMRC up to preferential creditor status may prove to be a good way to ingratiate the government with to the wider electorate, at a time when largescale corporate tax evasion is never far from the headlines. However in practice, we need to remember that such legislative changes always carry significant economic implications for businesses on the ground, and it is important to stay on top of these updates.   

This week Lovetts spoke to a UK-based client who had recently used our international debt recovery service to recover £8,500+ of debt from overseas. Having had no joy in tracking down the debtor directly from their end, the client passed the case onto Lovetts Solicitors. We are delighted to say that we were able to help, passing remuneration onto the client within two working days of payment.

What was the background to your debt?
“I had a customer based overseas that owed me thousands of pounds for nearly six years. I called the debtor several times and kept getting the run around and my calls were not being picked up. After many years of sheer frustration and anger, I came very close to giving up and thought I’d lost my money for ever.”

Why did you choose Lovetts Solicitors?
“Lovetts has a dedicated team of lawyers and agents in the UK, Europe and Africa and they did not want to charge me any upfront fees. The service was based purely on a no-collection no-fee basis.”

What were the benefits of using Lovetts Solicitors?
“Lovetts took all the stress by handling a very bad debt for me. When Lovetts secured payment for me, I had one of the best night’s sleep in my life. I would like to thank the firm for their friendly and efficient service and would strongly recommend Lovetts to others in the future. Without Lovetts Solicitors I am 100% certain I would never have got my money back.”

Over the years our debt collection has reached more than 100 countries across six continents, collecting an average of £1.7m worth of international debts per year. Lovetts’ international debt collection service operates on a no-win no-fee basis, and you can find out more about the service via the video below. We are delighted to have received such positive feedback from another satisfied client and for further information on how we can help your business internationally click here.

Earlier this week, representatives from Lovetts Solicitors attended a special corporate hospitality event, held at Woking football club. The event was attended by the Mayor of Woking as well as other dignitaries, and included a speech from Woking manager, Alan Dowson, on the club’s local charity and community initiatives.

As an advertising partner with Woking FC, Lovetts is proud to play an active role in supporting the club and its local community efforts. On Tuesday evening, the firm was privileged to be invited along to the Club’s stadium to watch the team take on Hemel Hempstead. It was a great occasion to be involved in, which was well attended, and saw Woking win 3 – 1 to go top of the National League South.
The evening included a sit-down meal in the Geoff Chapple Lounge, a charity raffle, the evening’s Man of the Match Award presentation, and of course a game filled with goals under the lights! It provided a strong opportunity to network with other local business teams, including Laithwaite Financial Services Ltd who provided the main sponsorship on the night, as well as a welcomed occasion for some of our hard-working team members to let their hair down and socialise.

“Lovetts Solicitors is very proud to be able to take an active role in the local community,” said Michael Higgins, Managing Director for Lovetts. “We know that Woking FC – our local club – is doing some amazing things in the community, and the firm is keen to support that. This was a great event that was thoroughly enjoyed by all staff members who attended.”

Many thanks to the club for having us along and you can view a full gallery of images from the evening here.

Lawyer Monthly, a corporate law based publication which boasts a broad global readership, has announced Lovetts Solicitors as the UK Debt Recovery Law Firm of the Year. This prestigious award is presented to a firm that has provided an outstanding service to their clients in the previous twelve months, not only through expertise and response to changing demand, but also with a dedication to innovate the sector they are in.

Since 1994, Lovetts Solicitors have specialised in debt recovery. Having always been a forward thinking firm with a true passion for technology – going paperless in 1998 and developing their market leading client portal CaseManager shortly afterwards – Lovetts continue to meet and exceed the expectations of their clients in all aspects of their debt recovery journey. Lovetts will continue to transform and modernise in step with their client base.

Speaking of the award after its announcement, Lovetts’ Managing Director Michael Higgins said “Lovetts have been specialist debt recovery Solicitors for over 23 years. To be recognised as the best debt recovery law firm is a great honour but credit goes to the team at Lovetts because without their hard work, quality and professionalism this award would not have been possible.”

If you or your business struggle with unpaid invoices or late paying customers, get in touch with Lovetts Solicitors through our website today.

Your customer has paid you but you now find they have gone into liquidation and the liquidators want the money back. Why? What can you do?

Payments made by a company after a Winding Up Petition has been presented are void if a winding up order is made. This is the case even if the petition had not been served or advertised when the payment was made, meaning you or the company would not know about it without making enquiries/searches (see ‘Could you have known about the petition’ below).

Until the last few years, liquidators often did not pursue repayments if the payment had been received in good faith i.e. you hadn’t known about the petition. These days, liquidators are much more likely to go after repayment. So, is there anything you can do?

Is it worth arguing with the liquidator?

Cost effectiveness is an important consideration. If you are going to argue with the liquidators, you need to consider the likely legal costs and the cost of you or your staff being diverted from other profitable activities. When calculating this keep in mind that any repayment comes straight out of your profit. If your charge to your customer and the payment was, say, £650 and your profit margin is 10% then only £65 will be your profit.

However, if you repay the money, it all comes out of your profits and you would need to earn another £6,500 to replace it. So, it may well be worth incurring costs up to a significant part of the payment in trying to resist the liquidators’ demand.

Before paying the money back you should check the following:

Change of position

• Have you changed your position, as a result of receiving the payment, in such a way that would make it unfair for you to repay the money?
• For example, have you bought some equipment that you would not have bought unless you’d received that particular payment? If so, you could argue that you have changed your position as a result of the payment and refuse to repay the money.
• However, simply using the money in the ordinary course of your business e.g. to pay bills doesn’t count. There has to be something more that would make it unfair for you to have to repay the money.
• Generally, you won’t be able to successfully argue that a change of position makes it unfair to repay the money unless you can also successfully argue for a validation order (see below).

Estoppel

• This is very similar to the change of position defence. In theory this defence is available but it is difficult to see how you could use it in practice and in most cases it probably won’t add anything to the change of position defence.
• You would need to show that there was (1) a representation by your customer about the payment e.g. that the money was owed (2) you acted on the statement (3) and this would be to your detriment if you had to repay the money.
• However, a statement that the payment was not void as a result of the petition would not be enough and the simple fact of making the payment is not a representation that the money was owed. There could be an estoppel if the liquidators said they did not intend to seek repayment but later changed their minds and pursued repayment – but that is unlikely.

Would you be entitled to a validation order?

• The court can make an order allowing you to keep the money but you have to show there was some benefit to the unsecured creditors generally from your supply. For example you may have enabled the company to complete a particular project that was profitable, or enabled the company to continue trading in a way that benefited its creditors, presumably by reducing the company’s indebtedness.
• Just because the company continued to trade after your supply doesn’t mean that trading was for the benefit of the creditors, but the court may be able to infer that this was the case, particularly if the liquidators don’t put in any evidence to the contrary.

Have you supplied the company on favourable terms?

• You could argue that you’d get a validation order if the company wants to place a further order(s) and you are refusing to supply them unless the existing debt is paid.

More generally

• You might also be able to argue for a validation order if you were misled e.g. your customer suppressed information about the petition and deceived you into dealing with them.
• In every case, you have to show that you dealt with the company in the normal course of business e.g. on your normal credit terms and that you didn’t know about the petition when you received the payment.
• If it is reasonably clear you could get a validation order, the liquidators are unlikely to pursue you further and force you actually to get an order. The liquidators will do the same sort of cost/benefit analysis as you do and will only pursue debts where they have a reasonable chance of getting paid.

Is there anything else that makes it unfair for you to repay the money?

Most of us feel it is unfair to have supplied goods or services and then not get paid, or worse still, have to make a repayment. The law says this unfairness has to be shared equally by all creditors. However, if there is something else, apart from the points dealt with above, perhaps some action or statement, that makes it additionally unfair, it is worth taking advice.

Being pragmatic

Often in the law, it’s not a question of being absolutely right or absolutely wrong but of being able to make a reasonable argument. If you can do this, you may be able to reach a satisfactory compromise rather than having to accept defeat.

Could you have known about the petition?

It is relatively easy to find out about petition once it has been advertised. You can search the London Gazette online for the notice that the petition has been presented and the petition should show up on a credit check. Before a petition is advertised the only way to find out about it is to phone the court. Not something most creditors would think of doing. However, the liquidators may argue that you could/should have known about the petition when you received the payment and would not therefore be entitled to a validation order.

Lovetts Solicitors has been featured in the latest issue of the Surrey Chambers of Commerce magazine, in an article examining flexible working opportunities within the modern workplace.

The article follows on from the recent Business Women in Surrey (BWiS) event, which featured Lovetts Operations Director, Cassandra McCarthy, and took place at Surrey Business School on the University of Surrey Campus in Guildford.

During the event the panel shared practical experiences and examined pragmatic approaches to how companies can physically implement more flexible working patterns for their staff. The panel emphasised that businesses are no longer solely adapting to traditional gender issues like opportunity and equality, but seeing an overall shift in employee attitudes and working processes.

“This is not just an issue that is related to flexible working hours around women or even parenting in general,” said Cassandra McCarthy. “At Lovetts, we see examples of flexible working across the company. We have a number of younger staff members for example who are currently undertaking legal training, and have approached us to schedule their hours around that. Some people come early to avoid traffic, or find it helps to work from home on certain days. It’s about evolving past that more traditional view of a 9-5 working structure and encouraging a level of flexibility through which people feel they are performing at their best.”

Also in attendance of the event was Lovetts Solicitors Managing Director, Michael Higgins, who gave his views on the subject: 

“Flexible working has been a hot topic since Flexible Working Regulations were introduced in 2014,” says Higgins. “This was one of the most interesting and engaging events I have ever been to with fantastic contributions from the panel. At Lovetts Solicitors we have become more open to flexibility and this fortunately resulted in Cassandra McCarthy joining the Lovetts team in 2014 as a Solicitor. Failure to adopt flexible working risks businesses losing out on employing extremely talented people such as those that appeared on the panel.”

Woking FC took on Premier League side Watford in the FA Cup earlier this month, and as an advertising partner of the local club, Lovetts was on-hand to throw our full support behind the team. We’ve collected together some of the key messaging and images around the tie here.

Beaten 2-0 by Watford, Woking put on a strong display in the third round of the FA Cup, but sadly in the end didn’t have enough for the Premier League side.

It was nonetheless a great occasion, and in addition to our advertising within the ground, on the Woking FC website, and in the regular home game programmes, Lovetts Solicitors also published messages of support in the Woking News & Mail, across our social media, and in the special souvenir matchday programme that was published in special celebration of the tie.

To view a selection of images from in and around the FA Cup tie, simply click here.

Woking still sit second in the National League South, with two games in hand over rivals Torquay. The Lovetts team will be attending a live game later this season to see The Cards in action first hand, and we wish them the best of luck in their upcoming fixtures! 

Overpayment of wages can be a difficult issue to deal with, not least because it places financial strain on both employer and employee Such instances can be notoriously hard to correct historically and even when a professional solution is found it can still leave human headaches in place. Here, we look at 3 areas in which businesses can apply practical improvements to the payroll process and avoid overpayment issues before they occur.

Process

As in other areas of financial management, it’s important to have an efficient payrolls process in place. But businesses should be wary of seeking too much short-cutting in this area, particularly because the monthly wage bill often represents a company’s largest recurring expenditure. Full training for all payroll staff is essential, and additionally it’s important to have good procedures and systems in place across all departments. This ensures that the most accurate and up-to-date information is constantly being fed into your HR and Payroll professionals.

Details like notifications of changes in hours, pay increases, and leaving dates should all be funneled into a standardised workflow process. Some might consider this back to basics, but where outbound payments are concerned, diligence is key. Different checks are vital when running payroll to reduce human error. It is important to check that any adjustments for the month have been entered correctly on the payslip, and in-turn payslips can be checked against the previous month’s record.

Communications

Strong communications may seem like an intrinsic component of any business practice, but in this area it is something to be especially mindful of, on multiple levels. As well as inter-departmental communications, maintenance of the employer-employee relationship is key. If any errors do occur, it’s important to discuss them with the staff member who has been overpaid before you take action. If you were to request full overpayment be returned in one go for example, this could have negative financial consequences for the employee and also damage morale.

Communications efficiencies can actually be increased even further by adding more people to the process. There is a growing understanding that in an age of AI it can be useful to have additional sets of human eyeballs looking over the changes that have been made within a given month. If somebody finds an error somewhere within the chain, that will be communicated.

Technology

Of course the march of technological advancement cannot be ignored, and in areas of quantitative work new technologies and the accuracy/efficiencies that they bring can be particularly useful. Dedicated payroll software makes running the payroll easier and more efficient, automating certain areas of the process to free up staff time for supervision/checks. Larger companies could even look at introducing HR software to link to payroll software, providing an electronic way of notifying changes.

The key is to find software that would benefit your business, whether big or small, and will generate cost-savings. It’s also very important to have backup systems ready in case of an IT glitch or a security breach. Beyond this, you might also like to consider bringing on-board a specialist third party provider. They are likely to be working with the latest technologies in this area and keeping a keen eye on the latest legislation, as well as offering that all important additional level of human checks.

However you approach your payroll process, it has traditionally been an area of business that is open to errors, particularly in terms of overpayments. By looking more closely at the three related areas of process, communications, and technology, it is possible to head-off more payroll problems before they occur.