Late payment and debt recovery are regrettable but inevitable aspects of business life that are likely to continue for the foreseeable future; the debt recovery process is not one that any supplier wants to find itself caught up in.
Suppliers are understandably fearful of tainting their customer relationships and Lovetts works hard on behalf of its clients to protect these relationships during any debt recovery process in which we are instructed. However, we also know that the best way to protect client relationships and keep cash flowing is to avoid issues of late payment from the outset. That’s why in addition to the battery of free content we provide to help with this we also believe that a new service called The Prompt Payment Directory has the potential to make a significant impact in this area.
The Prompt Payment Directory is an online platform that helps UK business mitigate the problems of late payment by collecting and redistributing crowdsourced contextual data around individual instances of late payment. The two key elements here are ‘crowdsourced‘ and ‘context‘.
By crowdsourcing data from suppliers this means that instead of relying on debtors to report on their payment practices suppliers become the primary source of data and in doing so take back control of the situation. In exchange for posting their first notice on the directory contributors receive their first 12 subscription for free. Data is submitted via a form and contributors are asked to give a reason as to why they were paid late. These will generally be the explanation provided by the debtor. This provides the vital context.
Subscribers to the service, including all contributors, will benefit from this pool of knowledge as it grows because it will help them understand more about their potential customers and thus know which questions to ask in order to avoid being paid late.
Don’t ‘Name and Shame’, do ‘Share and Declare’
While The Prompt Payment Directory permits contributors to post notices anonymously it does so only to protect those much valued customer relationships. The site does not permit contributors to run amok by posting what they like and submissions can only be made by a carefully structured closed format form which minimises abuse. Additionally contributors have full control and are free to delete their submissions at any time. The aggregated data is not on public display and it is only accessible to contributors and subscribers.
Transparency
It’s clear to see how this service has the potential to genuinely deliver on the promise of greater transparency which the business community has been clamouring for, but to do so suppliers need to wrest back control of the narrative by becoming the primary source of data and not leaving this to the debtors. Ultimately this process can be good for both suppliers and debtors that genuinely also want to see change.It is the difference between the old way of dealing with the problem and the much talked about but little practiced “change in mindset“.
Winding Up Petitions are all-too-often overlooked by businesses as an effective way to chase up and secure overdue payments from debtors. We have found that Draft Winding Up Petitions have an impressive 81% success rate in commercial debt recovery, usually due to the simple fact that it shows you are serious about recovering the money owed to you.
Only to be used for undisputed debts, Draft Winding Up Petitions help you to shout louder than other creditors who are likely to be chasing overdue payments at the same time you are.
What makes a petition of this type different from other debt recovery tools is that it is used when a company is unable to pay its debts on demand – deeming it technically insolvent. Although other tools such as letters before action are also popular and helpful in many situations, winding up petitions usually get the best results when a company is genuinely struggling to pay its debts, as opposed to delaying unnecessarily.
Winding Up Petitions, also known as compulsory liquidation orders, are drafted by a solicitor and accompanied by a letter to the debtor requesting payment within a certain time period – usually 7 days. A warning is also included, stating that if payment is not forthcoming, the petition will be presented to Court. This almost always has the desired effect, as the debtor will of course want to avoid the cost, stress and inconvenience of going to Court. In order to present the petition to Court, the debt must be worth more than £750 and you must be able to show that the company is unable to pay its debts. There are many different debt recovery tools and techniques, and a debt recovery solicitor can advise on which would be most likely to succeed, and most cost-effective, in your specific circumstances.
Key points:
- Draft Winding Up orders or petitions are sent to the debtor with a warning letter of Court action if payment is not made within seven days
- Winding Up Petitions are only suitable for companies which are technically insolvent, i.e. unable to pay their debts on demand.
- Winding Up Petitions are only for undisputed debts – if the debt is disputed, this can result in an injunction against you and you having to pay costs to the other side.
- Debts must be worth more than £750.
- Lovetts has seen an 81% success rate in collection following a Draft Winding Up Petition being provided to the debtor.
- More information on Winding Up Petitions can be found on Gov.uk here, and details on how Lovetts can help are available here.
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
Why Draft Winding Up Petitions Get Debts Paid Faster Than Statutory Demands
A stat demand is not always the quickest solution to payment problems – there’s just not enough urgency behind it to grind the debtor into paying up quickly read more
We’ve all read negative headlines about how so-called health tourism accounts for 2% of the National Health Service budget. But what if Trusts could get up to 150% of what they spend on overseas visitors back?… Well, that’s exactly what can now happen thanks to changes in the law. Just take a look at this:
The Law
New legislation says the NHS can now recover 150% of what it spends on patients from outside the EU. Not only that, it can also recover 125% from EU visitors through the European Health Insurance Card scheme and other agreements. And once a Trust has paid 75% of the original treatment cost back to the UK government and deducted 25% for administration costs, it can reinvest the remaining cash in patient care.
The Question
So does all this mean that ‘health tourism’ could actually boost the NHS? The answer, in theory, is yes… But the NHS can’t do it on its own… At least not according to the latest figures, which show the NHS recovered less than 20% of what it was owed from EU patients alone in 2013/14.
The Answer
Debt recovery solicitors, such as Lovetts, are experienced in UK and International Debt Collection. They know the rules inside-out, and also have a trusted network of agents all around the world to act on their behalf.
How Does It Work?
In the case of ‘health tourism’ by EU citizens, Lovetts will first contact the overseas patient, who may be able to claim the money from an insurer or their government. Failing this, Lovetts will attempt to recover money from the overseas patient’s government directly. In the rest of the world it is only the overseas visitor and any insurer who may be pursued for the fees. But Trusts shouldn’t shrink from taking action for the higher 150% because there is still a solid claim for reimbursement. The most important thing in all cases is that hospitals gather accurate identification data from the overseas visitor at the point of treatment. This will give us everything we need to start the International Debt Collection process. Lovetts currently work with NHS hospitals therefore, if you work in the National Health Service and would like to know more about how we are helping them recover money owed by overseas visitors, do not hesitate to contact us or share your experiences with us.
When you have multiple debts, there is no need to submit them to us one by one. You can take full advantage of our online CaseManager facility and request a Letter Before Action for multiple debtors in one single batch.
A number of our clients use this method and it saves them a considerable amount of time. You can do the same by following these steps:
1. Login to CaseManager and start by selecting Submit Case along the top navigation bar.
2. Click on the second option – Import a batch of UK LBAs.
3. Download the Excel Template and use the instructions if necessary.
4. Fill your company details in the first Excel tab form including the payment deadlines and letter type.
5. Enter debtor details in the respective columns.
6. Once you have completed the spreadsheet, send it to us by email to [email protected].
For many businesses, it is no longer favourable to be locked into one contract for a service. Instead, companies are employing two or more suppliers for the same service. Those who adopt this strategy say they are able to negotiate costs more effectively and have seen an improvement in the quality of the service they receive. They are also typically in a better position to manage cash flow and initiate a contingency plan if a supplier isn’t able to offer the agreed service at short notice. An increasing number of companies are adopting this dual supplier approach and are enjoying a wide range of benefits as a result.
Benefits of having two suppliers include:
- Choice and Flexibility
Contracting two suppliers for the same service gives an employer greater leverage when it comes to finding the best vendors in a particular field. A study by ISG Director Michael Kushner describes the use of multiple suppliers as an “agile” practice and one that has evolved from a maturing outsourcing market.. He suggests that companies who manage vendors in this way “enjoy superior flexibility in their choice of sourcing solutions and demonstrate greater adaptability to changing business circumstances”. A second study by Chris Ford, Alistair Maughan and Scott Stevenson Morrison & Foerster LLP found that using more than one supplier allowed businesses to better market test services, and that those who use this method purposely set up their various contracts to overlap and end in “waves” rather than consecutively – allowing companies greater choice and flexibility when it comes to managing and employing suitable vendors for their business needs.
- Stronger Contingency Plan
Having two suppliers offering the same service, allows companies to better protect themselves against unforeseen circumstances, i.e. if a supplier goes out of business or they are unable to supply what was agreed at the last minute. This is also another reason why an increasing number of businesses have made it a company wide policy to always contract two suppliers for the same service.
- Competitive Pricing
A two-supplier policy allows a business to shop around for the best price and drive up competition between same service vendors, this can be very beneficial when it comes to finding the best value for money service. When adopting a multi-supplier strategy, it is encouraged to gather quotes for a 100%, 70% and 30% of the business. This will allow you not only to compare costs between your suppliers, but it will help you find the best split between suppliers to provide your service. Even if you stick to a single vendor approach, it is good business practice to find out what other suppliers are charging to ensure you are receiving the highest quality of service for what you are paying. Sarah Burnett, research director for Public Sector BPO at Nelson Hall, claims that this is one of two key drivers behind businesses practicing a dual supplier approach. The second instigator is said to be “a desire to adopt best-of-breed for a particular process or domain and ensure access to superior capability”.
- Improved Quality
Those who employ two suppliers for the same service maintain that the healthy competition between vendors has improved the quality of service received and has increased response times. It also allows a business to compare services and enjoy the freedom to explore new suppliers (if the service supplied isn’t satisfactory).
Our Experience As A Buyer And Supplier
As a buyer we implement a two supplier policy throughout the business. Whether it be a trace agent or High Court Enforcement Officer, the policy has allowed us to compare service levels and performance ensuring we maximise our debt collection success. As a supplier, we have seen some clients use us as a sole debt recovery supplier and as part of a two supplier policy. For example a large Credit Insurer, and client of Lovetts, has operated a two supplier policy for their debt collection solutions with success. Equally, an NHS Hospital also experimented with dual sourcing, to investigate whether their sole supplier at the time was the best choice for their debt recovery requirements. They employed Lovetts as a second supplier and found that Lovetts significantly outperformed the debt recovery vendor they had relied on for their debt collections. As a result, they made Lovetts the main supplier. However, if they had not trialled Lovetts as a second supplier, they would not have known that there was a better service available for their debt collection needs. Does a two supplier policy work for your business? We would welcome your thoughts.
International debt collection might sound like mission impossible, but it really isn’t… With the right team on your side you can take decisive action and recover what you’re owed with very little hassle. So if you’re wondering how hard it actually is, simply take a look now as we shatter the five main myths.
You Have To Issue Court Proceedings In The Country Of The Debtor
If you have a jurisdiction clause in your contract then you can issue Court proceedings in your own country and make your country’s law stick. All you need is a court at the other end to recognise the deal you made enforce a Judgment you obtain. Even in China, where debt collection is technically illegal if you are not a licensed law firm or lawyer, you can still take matters to court. In fact, with increasing amounts of international business being done in China, some Western solicitors are even opening branches there.
If A Debtor Doesn’t Speak English You Have No Chance
English is the international language. Therefore the chances that nobody in a debtor organisation speaks it are almost non-existent. Of course, some uncooperative debtors may claim not to speak English. But don’t despair because in these rare cases a good solicitor will have trusted agents who speak the local language. As an example, we have been able to recover payment of debts in 104 countries to date.
It’s Better To Just Write Off The Bad Debt Against Tax
Cash in the bank far outweighs any tax relief you will receive on a bad debt. That’s largely because reported losses will make your firm look weaker on paper, affecting your ability to secure investment and credit in the future. So even if the debt has already been written off, it’s still worth referring the matter to no-win-no-fee solicitor. What have you got to lose?
Bank Charges And Solicitor’s Fees Will Swallow The Debt
Your international debt collection solicitor should make all charges clear from the outset. Plus, he or she may accept your case on a no-win-no-fee basis. Importantly, your solicitor will also use the most cost-effective channel for the eventual money transfer. That’s because solicitors are duty-bound to act in your best interests.
It Will Take Years To Get Your Money Back
Of course, some cases are more complicated and protracted than others. However, a vast majority of international debt collection claims can be resolved in a relatively short time if your solicitor specialises in this area of law. Nowadays a typical case takes only two or three months to reach a successful conclusion. And that’s it… Those are 5 myths about international debt collection dispatched. We hope you have found this blog helpful when it comes to your international debt collections.
Late payment is a common problem for all businesses. Large companies aren’t excused from urging businesses to pay suppliers on time and calling for small firms to pursue those who put them at risk by delaying this frustrating everyday occurrence either, and they too face the battle to receive payments on time. Here we reveal the most common excuses for late payments and how you can deal with them.
The Invoice Seems To Be Missing
Whether it was the office dog who ate the invoice or sheer negligence, lost invoices appears to be the most common excuse for payment delays according to research from credit control business Satago. Keep a paper trail of when you sent an invoice, and all your communication with a debtor – just be sure that you did in fact send the invoice. These days many businesses operate digitally – so make sure you email invoices to the correct department, with the relevant booking numbers included, to make payments easier. To be doubly sure of receipt: it never harms to send it in the post too. That way debtors have no excuses.
I Thought We Had 60 Days Not 30!
If your T&Cs don’t clearly state a payment period, you could be at the receiving end of this excuse. Business and Enterprise Minister Mark Prisk, from the Department for Business, Innovation and Skills (BIS), says it is hugely important that all businesses, particularly small firms, establish clear payment terms to ensure they get paid on time and successfully manage their cashflow. When speaking with your debtors, remind them of your payment terms and the possibility of being charged interest under the government’s Late Payment of Commercial Debts (Interest) Act 1998. For invoices that are not paid on time, it enables you to claim interest, compensation and (for orders placed after 16 March 2013) your reasonable costs of collecting the debt where these exceed the compensation. Interest can be claimed at 8% over base together with debt recovery compensation at the rate of £40 – £100 per invoice.
We Definitely Didn’t Receive The Invoice
Receiving an invoice late or never actually accounts for 44% of the excuses given to small businesses awaiting payment, according to a recent survey by credit control specialist Satago. A lot of company owners, especially SMEs, just don’t like doing credit control. They don’t take it seriously and they don’t prioritise it”, says Steven Renwick, Satago’s chief executive.
I’ll Pay You When I Get Paid
Your debtors may genuinely be waiting on payment from another person or company. Agree a strict deadline as to when you expect payment and, again, remind them that you are entitled to charge them interest under the Late Payment of Commercial Debts (Interest) Act.
I Sent The Cheque Last Week
If a debtor has legitimately sent a cheque you should be able to track that in some way. Request the cheque number and, or ask your debtor to cancel the initial cheque and resend it first class recorded delivery. Once they have done so, insist on having the tracking number so that you can locate its whereabouts and ensure it reaches your office. For future payments, update your T&Cs to include details on sending cheques. State they must be sent recorded, first class and the cheque number and tracking reference should be shared with you as soon as they have issued the payment. Even better: ask them to pay by BACS so the money hits your account right away.
We’re Not Paying You
Your debtor may claim the work was ‘never signed off’ or simply refuse to pay without giving you a just reason behind their decision. If you find yourself in this situation, seek advice from a debt recovery solicitor who will be able to review your case in detail and guide you on how to collect your debts. To protect yourself against these types of claims in the future, ensure you have a signed contract before you begin work.
The Boss Is On Holiday, So We Can’t Pay
A business should still be able to operate in the absence of a boss, especially for such a short time frame as a holiday. Request, if you’re not doing so already, to speak to a senior member of staff. Advise them on alternative payment methods, if this helps them to action a payment. Gently remind them that their boss will probably not like the incurring interest on the late payment either if they continue to withhold.
Starting legal proceedings should always be the last resort when it comes to debt recovery. That’s because reminding a debtor of his or her responsibilities, along with the potential consequences of not paying, is often enough to secure compliance. In the final stage of correspondence this is done through a document known as a letter before action, or LBA.
However, if a matter still ends up in court, you will help your case by showing that you took all reasonable steps to avoid taking legal action. This is where a good LBA can help you even if it failed to secure payment beforehand. You see, a well written LBA will also contain a number of important details in order to give the debtor little or no room for manoeuvre when attempting to defend the action.
Sounds difficult? Well don’t worry because help is at hand. To make sure you get your LBA right, we’ve compiled a list of 12 things to include, and here it is:
- Ensure you use the correct address so the debtor cannot deny receiving the LBA.
- If sending an LBA by email, always get a delivery and read receipt to evidence the correspondence.
- Use a reference code that is easily identifies you and relates to your admin’ system.
- Similarly, always use a reference that relates to you within the debtor’s admin’ system if you have one.
- Be certain that you use the correct date.
- Make it absolutely clear that your aim is debt recovery.
- Always specify the exact amount that is outstanding.
- Notify how the debtor can contact you in case the amount owed is disputed.
- Include a payment deadline and explain the consequences of failing to pay.
- Also include any details of additional debt recovery fees, interest and/or compensation.
- Remind the debtor that any CCJ, if issued, will affect their credit rating.
- Specify how and where the payment should be made.
With these 12 important points included you should be able to construct an LBA that ticks all the right boxes. Alternatively, your solicitor may be able to send an LBA on your behalf. At Lovetts we give you the opportunity to download an LBA template to ensure you don’t leave anything to chance.
Free Letter Before Action Guide & Template
How to write the best Letter Before Action to recover your debt in 7 days!
If you are owed money that isn’t being repaid then you are probably wondering how you can get it back. The two main options available are debt collection agents and debt recovery solicitors. But which is best?- No doubt, solicitors sound more expensive, but what are the benefits of using a law firm? Join us now as we give you a rundown of the top five reasons why a solicitor could achieve more for you than an agent.
A Solicitor Can Activate Court Proceedings
Agents can only request that money be repaid. As a result, these requests are often ignored. Solicitors on the other hand can actually begin court proceedings against the debtor. And as you can imagine, formal notice of active proceedings can be far more persuasive than a mere request.
A Solicitor Knows Your Legal Position Instinctively
Debt recovery solicitors often resolve disputes swiftly because in most cases they can evaluate your legal position straight away. This means they’re more likely to accept any case that has merit. However, debt collection agents may turn a job down if it is disputed, even if the dispute is spurious.
A Solicitor Will Always See The Bigger Picture
If you’re in business you never want to alienate your clients. Thankfully solicitors are masters of the softly-softly approach, if that is what you require, which means you can maintain good relations after a debt is settled. Agents, however, sometimes preclude this outcome by acting too robustly, especially if they are working for incentives.
A Solicitor Has A Higher Duty Of Care
Solicitors are regulated by the Solicitors Regulation Authority and The Law Society. This means they have a solemn duty of utmost good faith to act in your best interests. In contrast, agents are regulated by the Financial Conduct Authority, which aims to protect consumers – in this case, individual debtors.
A Solicitor Can Help Protect You Going Forward
Unlike debt collection agents, debt recovery solicitors can help protect your business from the legacy of outstanding debts in the future. They do this by ensuring you use the right terms and conditions as prescribed in legislation. For example, with the right wording you can also recover any third party cost of debt recovery. So there you have it. That’s our rundown of the top 5 reasons why debt recovery solicitors are more useful than debt collection agents. If you are owed money and want to know more about our service, simply call us and speak to one of the team.
Unpaid debts are unfortunately an everyday occurrence for many business owners and finance teams. Debt collection can be frustrating, time consuming and can seriously affect cashflow. But no business can afford to ignore debt recovery. “SMEs are racking up a collective £10.8 billion a year in their attempts to recover overdue payments – that’s an average of almost £11,500 each, or £955 a month. A huge 80% of all companies which experience late payments say they are being kept waiting one month or longer beyond their agreed terms before receiving payment.” (source: Bacs) However, there are some simple steps you can take to recover your debts effectively and efficiently – let us sum them up for you.
Do Be Organised
Sending your debtors a friendly reminder a week before payment is due is a useful practice to adopt, as it will hopefully keep your invoice first in line to be paid. As soon as a payment is late, chase your debt in a polite manner. Follow up regularly with your debtors to encourage prompt payment and to ensure you or your team are speaking with the correct people.
Don’t Go Round There With A Baseball Bat
We understand how infuriating it is when a company or person owes your business money. Especially when you were under the impression that you had a good working relationship. We strongly advise not to get aggressive, if it gets too much, invest in a stress ball for your desk!
Do Keep A Collections Record
Time is money for any small business – and time spent trawling through email and paper invoices could be spent elsewhere in a business. So it pays to keep a ledger and record of your dealings with debtors, this leaves them with little to ‘push back on’ if they become late payers in the future. Keep a record of the time, date and what was said, each time you speak to your debtor. This will help with future communications, if it is claimed that your invoice was not received or it was not clear that payment is due.
Don’t Be Embarrassed To Pursue Debt Recovery Measures
Do Escalate It
Whether you’re the CEO or a Financial Clerk, outstanding debt is no laughing matter. The pressure to recover debts owing to your business can be enormous, and at times it can even feel like an impossible task. If you are owed outstanding debts, speak to a debt recovery solicitor who could collect debts on your behalf today – it could cost you less than a packet of crisps! We’ve found that over 84% of our Letters Before Action are paid without any further action being required. This is a formal letter that must be sent before any legal action is taken. For every £100 of debt recovered our clients pay on average just 35p.
Don’t Swear At The Debtor
Using profane language to get your point across will only make communications between you and your debtor more difficult. Refrain from sending threatening emails too, as these could be used as reasons to withhold payment. If you’ve already done that (oops) not all is lost. One huge advantage of using a debt recovery solicitor means you help detach yourself from the situation and any negotiations, which should hopefully take the heat out of the situation.
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