Usually when a company owes a debt, their creditor can file court proceedings against them in the hope that they will pay – and use a method of enforcement to recover the money if not. However some circumstances, such as a debtor refusing to engage, make this method of debt recovery an unsuitable option. This is where strong action is needed: A Draft Winding Up Petition (WUP). 

What is the difference between a Winding Up Petition and a Draft?

A Winding Up Petition is a petition sent to Court to wind up a company that cannot pay an undisputed debt. A company who cannot pay a debt on demand is deemed insolvent, and this petition starts the process of liquidating them. If a company refuses to engage with their creditor about any outstanding amounts, threatening liquidation is a good weapon for debt collection.

The creditor can ask a solicitor to create a WUP, but hold off on serving it formally. It will be sent only to the debtor with an accompanying letter warning them that if they do not settle the debt within a set time period (usually seven days) then the petition will be submitted at Court. This is known as a Draft-Winding Up Petition. The debtor will be motivated to avoid Court and liquidation, and Lovetts have found that 81% of Draft-Winding Up Petitions result in full payment of the debt. 

How can I claim late payment interest, compensation and costs?

What happens when a Winding Up Petition is formally served?

If a Draft-WUP did not achieve the desired effect, the next step is to go to Court.  This is the process followed in that situation:

1. The petition is presented (i.e. sent to Court for a hearing date to be given)

2. The petition is served on the company’s registered office

3. After at least 7 days has passed (but at least 7 days before the hearing is due), the Winding Up is advertised in the London Gazette.

4. Once the Winding Up has been advertised, the debtor’s bank will freeze all company accounts. This effectively prevents them from continuing to trade.

5. At the hearing, the Judge will hear the petition and make a Winding Up Order against the debtor unless they provide a defence or prove they can pay the debt.

6. Once the Order has been made, the official receiver will start the process of liquidating the company and distributing the assets to the creditors.

7. The directors of the company being wound up will be investigated for any wrongful trading. If they are found to have been accepting credit with no expectation of being able to pay it back, they may be found personally liable for certain debts.

When a company goes into liquidation, there is an order of priority when it comes to the distribution of assets.

Ensure you can have COST-FREE debt collection by incorporating these T&C clauses in your contracts and invoices.

There are certain criteria to meet before sending the Petition:

– The debt must be a at least £750. Usually this debt recovery option is used when the debt is much larger than this due to the legal fees involved.

– The debt must be undisputed. If the debt is disputed, this may result in an injunction against the petitioner, the petition being thrown out of Court and the creditor being ordered to pay the other side’s legal costs.

– The debtor must be a company, not an individual. The bankruptcy procedure is slightly different for an individual.

At Lovetts we have found the Draft-WUP is much more effective than a Statutory Demand, resulting in payment 81% of the time. Not only does it come with the threat of being liquidated, it also provides only 7 days to take action whereas the Stat Demand gives the debtor a full 21 days to continue delaying payment.

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 

In 2016, the UAE oil crisis led to job cuts and a slump in the tourism industry. Significantly, the Persian Gulf nation has seen its consumer bad debts rise, a situation that has fueled the recent increased scrutiny on debt recovery agencies. To mitigate the financial crisis, the UAE credit bureau instituted new credit policies to limit delinquencies in the small and medium enterprise sectors. In this guide, we will address the intricacies of debt collection in the United Arab Emirates.

General Information

Although payment terms in the UAE are typically 30 days, 60-day payment terms are not uncommon. Larger entities such as major oil and gas companies usually have shorter DSOs (Days Sales Outstanding) than smaller to mid-sized companies. In 2015, the average DSO for small and mid-sized companies was 91 and 93 days respectively, while the average DSO for large and mega-sized companies was 80 and 62 days respectively.

Until 2016, debt collection specialists in the UAE had few options for dealing with defaults. However, the UAE debuted its first comprehensive bankruptcy legislation on 29 September 2016, replacing the older Commercial Transactions Law (UAE Federal Law No. 18 of 1993). The new law repeals Chapter V of the 1993 Commercial Code, which encapsulated the rules that govern the current insolvency system. Some important provisions include:

Among other duties, the committee is responsible for supervising the financial restructuring process outside the judicial scope, appointing financial restructuring experts, maintaining an electronic record of individuals who have been issued bankruptcy rulings, sponsoring initiatives that raise public awareness about the law’s objectives, producing periodical reports about the law’s achievements, and proposing amendments to the law.

The Benefits of Having An Experienced International Debt Collector

Ensure the debt collectors you use have extensive experience of international debt collection. For example Lovetts has trusted agents abroad, so they can contract debtors, such as those in the UAE, in their own language.

Collection Practices and Court Proceedings

The legal system in the UAE is based on Shariah and civil law. However, the majority of commercial cases are adjudicated in civil law courts. Additionally, the UAE also has civil law courts with jurisdiction in established Free Zones. At present, there are no less than 45 Free Zones in the country. Free Zones such as the Dubai International Financial Center are empowered to create unique legal frameworks for civil and commercial matters. To date, creditors in the UAE have recourse to:

Insolvency Proceedings

In the UAE, insolvency or debt recovery proceedings begin in the Court of First Instance. After the court issues a judgment, the parties have the right to appeal to the Court of Appeals within 30 days. In the Court of Appeals, the parties are allowed to introduce additional witnesses and evidence to bolster their arguments. The judgment of the Court of Appeals stands unless the parties further appeal to the Court of Cassation within 30 days. Any judgment by the Court of Cassation is final, so creditors should carefully assess the ability of debtors to meet their financial obligations before they proceed with costly litigation.

It should also be noted that all creditors must submit their claims to the liquidator within 10 days of any published bankruptcy ruling. The liquidator will then rank creditors according to their claims and distribute awards accordingly.

As a credit controller in your company, you probably have more than enough tales to tell about debt recovery. Even so, you may finally run into situations that you haven’t before. If you’re still fairly new to your job, one scenario you may encounter involves a customer giving an excuse for not paying their invoice on time.

One common thing said is that the customer never received your invoice after you sent it out on paper or in e-invoice form. While it’s true things could occur where an invoice goes missing, some customers might use this as a way to avoid paying a bill on your due date.

Obviously, this is going to involve some time to contact these late-paying customers, and it may have to involve lengthy phone calls. It’s worth the effort, though, because you have a way to determine whether there’s truth involved or not.

As part of your credit control process, you should create a questionnaire that pins down what might have caused the customer to not pay. You can do this with eight key questions scoping out the truth. With these questions, you’ll have proof on record if the customer says they didn’t receive an invoice again.

1. Where Should Invoices Normally Be Posted?

If the customer thinks you lost the invoice, you need to ask them which address you should send your invoices to on a regular basis. Maybe they have another address they prefer if they don’t check their previous mail box often.

Or, if you send e-invoices, ask them which email address you need to send to.

By asking this question, you’ll know you sent your invoice to the right place rather than having the tables turned.

2. Have You Changed Addresses Recently?

Obviously, you can’t read the minds of your customers, so they need to update their address if they recently moved. Ask them when they moved and what their new address is. Be sure to remind them that they need to contact you if they move again so there isn’t any future misunderstanding.

3. Who Should You Send the Invoice To?

Invoices and paperwork can get lost within a company. Having the name of the person in accounts payable ensures your invoices gets to the member of staff able to authorise payment straight away.

4. Is There Any Other Issue?

The customer may tell you they don’t have a copy of your invoice and that they couldn’t pay it until they receive one. You’ll want to ask them if this was the only reason they haven’t paid right away. If they say yes, then it’s time to send them a copy immediately with a promise from them they’ll pay.

Asking this question gives you a good way to receive your money once you send them a new copy of the invoice. It makes it tougher for them to come up with other excuses for not making a timely payment.

5. Can You Pay The Invoice Immediately After Receiving It?

As a connector to the above question, you need to ask the customer whether they can pay the bill as soon as you send them a new copy. By holding them to this promise, you’ll place it on record that they committed to pay once they received the new copy you send them.

Should they not pay at this time, you’ll have enough records to show you’re in the right to add a late charge for deliberately not paying on time.

6. Should I Email Or Fax The Invoice?

The faster you can get the invoice to the customer, the better. Sending these in real-time doesn’t provide any excuses for the customer not addressing the invoice. It’s why you should ask the customer if you can email or fax the invoice to them.

Going this route rather than regular mail doesn’t allow time to pass and create excuses to forget.

If you think a customer is likely to use this excuse, be proactive and call the customer a week or two before it becomes due and ask whether they have received the invoice and whether it is on the payment run. This will keep you one step ahead of late payments.

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The Challenge

Simple disputes relating to a debt can quickly escalate to bigger problems and damaged relationships. In a recent case, our client had a long standing dispute in respect of goods it had received from the other side. Due to the considerable number of orders and deliveries, the client required a paper trail from the other side to reconcile its ledger. Due to personnel changes on both sides, it was proving quite difficult for the ledger to be reconciled. Offers had been made by both parties; however, the parties reached a stalemate and relations had become fraught. Our client instructed Lovetts believing that they were destined to end up in Court over this dispute. 

The Solution

Lovetts were able to utilise their extensive experience of dispute resolution and worked with both parties to facilitate the reconciliation of the respective ledgers. Accordingly, both parties were able to reach a settlement shortly after Lovetts were instructed. Lovetts effectively acted as a mediator between the parties and was able to resolve the dispute swiftly. 

The Benefit

Substantial legal costs were saved by our client as we were able to reach an early resolution. Further, as litigation was avoided, the trading relationship between the parties was salvaged. Upon reviewing a matter, Lovetts considers both the legal position and commercial position. We see the advantages of early settlement, as if the matter progresses, often the only winners are the lawyers, which is not what Lovetts are about.

It happens in every business and in every industry – debt recovery. Clients and customers pay invoices late and even former employees might fail to pay back overpayments to them. You’ve called. You’ve emailed. You’ve sent letters through the post. Nothing works. It’s at this point that businesses should begin considering turning to a debt recovery firm. These firms specialise in getting the money that needs to be paid. They understand what works and what doesn’t. However, because of the vast number of debt recovery firms on the market, it can be difficult to find the one that’s right for you. The following are a few, (hopefully unbiased) tips to guide you through this process:

1. Research

Before any decisions are made, it is wise to complete a little bit of due diligence. Debt recovery firms may look like a good fit for your organisation at first glance, but once you dig a little deeper, you’ll see that they might not be exactly what you’re looking for. 

Look into what industries the firm specizalises in, or at least has experience in. If they’ve never worked with companies that are in your sector, they may not have practice speaking in the terms that are most appropriate for your industry. In other words, you want the firm that you work with to maintain your public image, as well as bring in a satisfactory rate of debt recovery. You should also explore whether the firm mainly works with commercial or consumer debt, what size businesses they typically work with, and if they have experience dealing with the type of debt associated with your industry. 

You should also look into size. Some firms are made up of just one individual while others are large corporations with thousands of employees. Bigger firms can typically handle bigger and more debt recovery cases. Just be sure that they aren’t too big, leading to a poor personal business relationship and poorer quality service. As long as they can handle your case load and utilise state of the art technology, you can be more secure in the firm’s financial stability, scalability, efficiency, effectiveness, and customer service. 

Finally, before you make a decision on a firm, be sure to look at their history. The longer a company has been around, the more experience and success they’ve likely encountered. This experience indicates that they provide good returns, understand the regulations in your industry, and are familiar with various recovery procedures. They probably have a system in place for their collections that has been slowly perfected and will reliably achieve the results that they promise. Another beneficial aspect of a recovery firm with a history is that they know how to adjust to regulatory and technological changes without disrupting their current operations—meaning no surprises for them or for you. 

2. Contingency Costs And/Or Fixed Fees

It’s never a wise choice to go with the cheapest firm. What you pay for is generally what you’ll get. The best case scenario with low-cost firms is that you won’t get much of a return. The worst case scenario is that your reputation will take a hard hit. But when looking at a firm’s fees and costs, you need to dig a little deeper because how agencies charge for their services can differ. Some firms will have a contingency fee. In other words, if the firm doesn’t recover the debt then they won’t charge you. If they do collect the debt, they’ll generally charge a percentage of the amount collected. It’s also important to remember that a firm may not have a set contingency fee. The fee could change over time based on how old the account is, how many debts have been collected, and more. Other firms may provide fixed fee debt recovery services. This usually starts with a small fixed fee for a letter before action… Some firms offer options to be charged either a fixed fee or a contingency fee. The choice would be yours. 

3. Review The Process

To ensure that the firm is a good fit for your debt recovery needs, you should take a look at their practices. Do they start small and then expand their efforts? This would look like sending letters and making phones calls. If no progress is made, a transition to legal proceedings is made.

The use of tracing is also a good indicator of how effective the firm’s recovery services will be. This method enables them to find debtors who have moved addresses and changed phone numbers. It can also be a good idea to see if there are any testimonials or recommendations from businesses that have used their services before. This is a perfect way to understand how their practices could affect your reputation. It’s best to partner with an agency that avoids harassment, using profane language, or calling at inappropriate times of the night or morning. 

4. Check For Insurance, Licensing, And Compliance

You don’t want to work with a firm that isn’t compliant with national regulations. This includes fair practices, telephone consumer protection practices, medical collections privacy practices, proper licensing and more. But to cover all of your bases, you should check to see if they are insured and regulated.   

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The level of trade between exporting nations and the United States is continuously increasing. Now, the United States is buying nearly one-and-a-half times as much from other countries as it is selling to them (exports at $1.6 billion, imports at 2.2 billion. However, indebtedness to UK creditors is among the lowest ratios imports/exports is only .98). The ratio of imports/exports worldwide is rapidly increasing as the world becomes more industrially advanced. It is increasingly important for international creditors to understand U.S. law regarding collecting debts in the U.S.A. 

Credit Bureaus and Credit Agencies

For one thing, in the United States there is far more access to access to credit information relating to individuals and businesses than other countries. Sophisticated computer databases of credit information are operated by the reporting agencies. These allow creditors to assess to determine the credit risk of virtually all individuals and business who have ever established credit. The databases provide information helpful in determining whether to open a collection process or litigation. 

There are numerous and varied debt collection agencies in the U.S.A. Some are nation-wide agencies with offices across the country or in other countries. Some are industry specific. Some limit their scope in other ways. 

The activities of collection agencies in the U.S.A. are governed by Federal and State law. Recovery of debts in the United States may be especially challenging for foreign debtors. The legal system around debt recovery was devised with a sympathy for the debtor and the prevention of harassment in collection, restricting the ability of creditors to telephone or mail them.

When a collection agency has difficulty making a collection and judges that legal action is necessary, they will usually recommend referral of the case to an attorney licensed in the state where the collection is to take place. Almost all collection agencies and lawyers accept debt recovery cases on a contingency basis, sometimes with added costs that may not be contingent. Payment to lawyers or collection agencies is the responsibility of the creditor. There are times when the costs of collection are greater than the debt to be collected. 

International Debt Collections

The legal system in the United States is an adversarial system, based on English Common Law. Both parties in law suits have to present evidence to prove their cases. It is complicated by the face that each state, as well as the federal government has its own court system and individual laws. While basic principles of international accommodation and “courteous recognition of another country’s laws” does apply between the U.S.A. and other nations, a final judgement in another country is not necessarily enforceable in the United States.

Most of the time, international creditors will have to bring a court action in the United States. Not only that, but in the United States, each state specifies statutes of limitations within which a creditor must file an action to recover debts. These time limits vary from 3 years to 6 years (also depending on the kind of contract the debt is based on).

Any debt collector who tries to collect debts outside of the statute of limitations in a given state is in violation of the Fair Debt Collection Practices Act. International creditors should also take note that the exchange rate they will receive for United States currency may be determined by the date of the contract originally agreed to. It may also vary from state to state. 

Collection Professional Organisations

The Commercial Law League of America (CLLA) is the oldest private non-profit organisation of commercial collection agencies and lawyers in the United States. It maintains a membership list of collection agencies and attorneys who specialise in bankruptcy and creditors’ rights law available to members. 

Collection Profile

According to the United States of America Collection Profile: “The payment culture of domestic companies is becoming increasingly uncertain and, in the absence of a harmonised framework on late payments terms remain a mere contractual issue and the average DSO [Days Sales Outstanding] tends to be high.

“The profile study finds that the court system is complicated by a federal structure that does not include debtor protection mechanisms and simplified proceedings for settle even the simplest files. There are significant delays and costs associated with collections. Furthermore, once the debtor becomes insolvent, collection of debt becomes very complicated. The bankruptcy system is pro-debtor. In practice bankruptcy re-organisation drains resources and reduces the likely collection possibility. In most states, debtors’ personal assets are protected. There is a possibility that a corporate entity who goes bankrupt will be listed as “no asset” cases. This means that after liquidation, the likelihood of collection is reduced to zero. 

Payments in the United States normally take place within 28 days on average. However, delays (DSO) of 5 to 10 days tend to be increasing, especially by larger companies. In some instances terms can extend to 90 days or even 120 days. Some business have become very “relaxed” about invoices. It is not uncommon for companies to see companies extend their payment terms to their suppliers without notice, suggesting a corporate belief that extending terms is a right.

The larger the companies appear to use their buying power to intimidate debtors. Payment terms are not regulated by law, but are agreed to as part of the original purchase contract. Late payment interest may be added to an invoice up to a legal limit imposed by the debtor’s state. If it comes down to collections, the creditor cannot legally charge the cost of collections unless the original contract includes that practice, signed by the debtor.  

What law is your contract under? Save your company time and money by being on the ball when it comes to jurisdictional and governing law clauses. 

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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