In the current financial climate, it is essential for credit managers to review their debt recovery ledgers and credit policies as well as to look to tighten control over the company’s debtor asset. Our top tips will help enhance the recovery of money which is due to you.
Tip number one: The principles of 'Crimes'
A simple tool to assist in the recovery of debt is to apply the principles of “Crimes” to your processes. Crimes stands for:
- C = Collections
Have you taken and explored all practical steps to recovery?
- R = Resolution
Have all enquires and disputes been resolved?
- I = Identify
Have you identified the debtor and the correct legal entity?
- M = Means
Is the debtor worth suing?
- E = Evidence
Can you prove your claim?
- S = Speed
Progress matters quickly to avoid not being paid.
Tip number two: The Late Payment Act
A recent survey shows that a high percentage of business experienced customers extending payment terms. The UK economy needs a culture shift which will make the late payment of debt less acceptable. Whilst debtors seem to think that they have an inherent right to pay late, creditors need to use all the available tools to secure payment.
The Late Payment Act is there to support creditors to encourage unco-operative debtors to pay on time. More and more creditors are now utilising the Act which is there to assist and encourage debtors to pay on time and penalise those who don’t.
Creditors are encouraged to change their terms and conditions to incorporate interest and compensation for late payment even though there is a statutory right to this, given that some debtors will withhold payment even if no issue has been raised in relation to the goods or services supplied.
The DWF Recoveries team are seeing a growth in the number of businesses who are not simply unwilling to pay but with companies and individuals who cannot pay because of their poor financial circumstances. In particular the SME market businesses are suffering most of all because larger organisations are forcing slower payments and demanding discounts at a late stage.
Tip number three: Our 15 practical steps for enhanced debt recovery
It is important to look at some of the practical steps available which will enhance the recovery of money which is due to you. They are effective and simple ways to improve your processes.
- Ensure your Terms and Conditions are in order
- Put stricter terms in place and stick to them
- Set sensible credit limits and don’t let debtors exceed terms
- Invoice quickly and efficiently to encourage prompt payment
- Ensure regular communications with your debtor
- Keep in touch by telephone – but always have the facts to hand
- Understand the psychology behind your debtor types
- Offer financial incentives for prompt or early payments
- Be persistent
- Sales and Credit control teams must work together.
- Act quickly when payment terms are breached
- Ensure payment plans are both realistic and practical
- Ensure that third party intervention is used at an early stage
- Act decisively at all times – don’t let debts die of old age!
- Prevention is better than cure
Taking legal action to recover what is owed
The Recoveries team at DWF work alongside the internal Credit Control and accounts teams of our client businesses to ensure that they are maximising on recoveries whilst keeping costs as low as possible. Whilst no one relishes the thought of having to take legal action it is sometimes necessary to retrieve money which is rightfully yours. Patience and false promises are not always the answer especially if your own business is at risk because of outstanding debt.
Seeking our advice at an early stage can help secure your money and seek to protect your debtor asset.
If you have any questions or would like more information please contact David Scottow, National Head of Recoveries.This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.