Integrating internal credit control procedures with a third party debt recovery solicitor such as DWF can help to ensure unpaid fees are collected sooner rather than later.
This can also help to reduce your exposure to bad debts write offs and enable you to maintain positive relationships with your clients even when such issues arise.
The professional services sector tends to work on the basis that ‘people do business with people’ and by developing successful working relationships with your clients, this serves to promote the long term success of the business because satisfied customers will often come back for more and regular repeat business will generate good cash flow, which as we all know is the lifeblood of any business.
However, there can be a downside of working in a sector where good working and social relationships with your clients often become entwined. This can lead to running the risk of potentially coming up against issues where ’familiarity breeds contempt’.
Where a professional supplying a service is expected to deal with both the day to day operational services being supplied as well as managing the relationship itself on a personal level and also having to deal with the question of unpaid fees, this can often lead to what feels like a conflict of interests and even disaster when non-payment results in a complete breakdown of the working relationship.
The benefit of having a written credit policy for professional organisations of all sizes from sole practitioners through to large professional firms is that the organisations policy in relation to payment of fees is clearly defined and documented. Such a credit policy should be followed rigidly unless there are very good reasons why credit control and recovery action should be suspended, for example, where there is a valid dispute due to a complaint or negligence claim.
Another benefit of this is that you could even potentially have a document, which is presented in such a way that you can publish it to your clients, from initial engagement or when you feel it is appropriate to highlight the policy to them because a payment issue has arisen.
It is also beneficial to incorporate into your credit policy what happens when you have exhausted your own internal credit control procedures, such as issuing reminder and demand letters and chasing for payment by telephone. Ideally, this should cover referring the matter out to an external debt recovery solicitor such as DWF at this stage to ensure that your client is treated fairly and professionally by applying reputational risk management to preserve your good name at all times.
This step should also be taken when the debt reaches an age, for example, more than 90 days old, or whenever you feel that your clients will have had more than enough time to comply with your requests for payment and in the absence of them not having satisfied you that there are any justifiable grounds for withholding payment.
Another benefit of referring the matter to a third party debt recovery solicitor is that this will increase the chances of you being able to preserve your relationship with the client on the basis that you have had to make the referral in line with company policy and that it is nothing personal. The right partner will provide cost effective and commercial solutions as well as a sophisticated online case management system.
Debt recovery solicitors, as professionals themselves, are often responsible for collecting unpaid fees and dealing with bad and doubtful invoices in their own firms on behalf of their colleagues working in other practice areas, which means that they are well versed in dealing with the recovery of professional fees and also counteracting the common reasons for non-payment as well as the common disputes and defences that arise in such cases.
Neil Jinks, Director, Recoveries at DWF said: “We act for numerous professionals and professional firms of all sizes in dealing with their debt recovery, which means we have built up vast experience and gained knowledge and expertise of the issues arise across various professional groups such as lawyers, accountants, surveyors, doctors, surgeons, dentists, architects, patent attorneys and many others. By dealing with each profession as a unique group facing common problems we are often able to apply this to enable early stage resolution when we are instructed.”
Neil added: “I am surprised that we act for a number of law firms from sole practitioners’ right up to some of the leading law firms. The reason for this is that the firms do not have a debt recovery team themselves and would rather focus on the more positive aspects of their business and maintain good relationships with their clients even when there are outstanding fees.”
“This means that when it turns out to be a short term cash flow problem for their client, even when we have intervened, the client relationship has been maintained and can continue on into the future. It goes without saying that we work on a ‘no poach’ basis and will of course sign up to non-compete agreements to give our professional clients peace of mind.”