What are the barriers to your debt and invoice recovery and how is it possible for this to get so out of hand? SBT’s Jess Saunders caught up with Alan Wood from professional certificated provider of enforcement services, (or if you’d prefer, Bailiffs) Penham Excel who took us through the idea that we can all work smarter to be paid what’s due to us

Unless you are one of those rare businesses that take its payment up front for your product or service, you are likely to have had an unpaid bill or invoice at some point. Maintaining good cash flow is a real challenge for almost every single business out there, but is also absolutely essential for future growth and success.

The job of recovering unpaid invoices typically sends most people in to a cold sweat and invariably gets pushed down the ‘to do’ list. It’s something that gets relegated to the ‘may do if I find time’ list, ultimately finding itself failing to make it on to any list at all, so is forgotten completely.

Jess Saunders: So, Alan, why is recovering unpaid invoices such a chose and what are the barriers?

Alan Wood: One of the main reasons for failing to pursue an unpaid invoice is a lack of resources or suitably trained staff to deal with this task. I frequently see this job being passed down to a secretary or receptionist who has been offered little or no training and typically does not have any background in debt recovery or speaking to customers in this regard. The job of debt recovery requires a certain set of skills and a junior member of staff may simply make a quick phone call or send a standard letter, which might not be enough to provoke payment.

Another main reason debt recovery is overlooked is the fear of losing a customer or having that customer bad-mouthing your reputation.

Far too many companies fail to understand how effective a good debt recovery procedure is for your cash flow, reducing stress and only resulting in a loss of a customer when you decide. Everybody has to reach a point where you draw a line in the sand and say future business with this company or individual is too risky. It is important that, within your debt recovery procedure, your staff understand what that trigger point is.

JS: What is a good debt recovery procedure then?

AW: The first and most important thing to consider is the accuracy of the customer information. When setting up an account or starting a quote for a job, think of what information you might need at the end of the process should they decide not to pay.

This might sound obvious, but include details such as:

  • Full postal address including unit or house number
  • Full name(s) of those who are being billed
  • Senior personnel – not just a company name
  • Landline, mobile phone numbers and email addresses
  • Date of birth (if appropriate) and if you can’t obtain a date of birth, a rough age can be really helpful when trying to trace someone where father and son have the same name (for example).

Depending on the type of credit being offered, you might want to run some of your own checks as to their ability to pay, or some sort of address verification. Of course, this is something that we might be able to help you with.

One of the biggest and most frequent issues when recovering unpaid invoices is a lack of communication much earlier in the process. I have been amazed over the years how many companies fail to set out at the point of sale or quotation, their payment terms. A customer will always think they have 30 days plus, but a kitchen fitter (for example) might, and usually does if independent, expect payment on completion of the job. This misunderstanding is often the flash point for what turns in to a breakdown in customer relationships and potentially non-payment.

Establishing a procedure is simple enough, you need to allow for an escalation from ‘gentle reminder’ to ‘final notice before court action’ and set out how many letters you feel are appropriate. Will you supplement these letters with text messages and emails? Both of which are rapidly becoming an essential part of any debt recovery process. Over what period are you prepared to send these forms of communication before passing it to your solicitor or an enforcement agent?

Sending random letters with vague threats of further action will prod the odd person into paying, but to encourage payment from a more hardened non-payer, they will have learned that these are typically empty threats and, in my experience, they generally won’t pay until a third party specialist is involved. Much of this is down to client relationships; you spend a lot of time and, sometimes money, building client relationships and your late or non-payers will play on that relationship giving never-ending excuses and promises to pay.

Create an effective debt recovery procedure tailored to your exacting needs and stick to it!

JS: And if someone were to take this to court, would it cost the earth?

AW: The judicial process in this country is pretty straight forward, so long as you can demonstrate the debtor has been given sufficient time and notification to pay their debt. You can do this yourself via Money Claim Online (www.moneyclaim.gov.uk) or via your preferred solicitor, who would obtain a County Court Judgement (CCJ). Both options are quite straight-forward. Court papers are then issued to your customer and they will have 28 days to pay; or they get a chance to stand in front of a judge and present their case. If, after this, the judge is satisfied that your debt is due and the debtor has still not paid, a CCJ is awarded and you can then instruct a County Court enforcement agent, or for a small court fee, and transfer the case to a High Court Enforcement Agent. They are likely to attend quicker and, in my experience, be more proactive as well as having access to software for tracing, address verification, asset checking and investigation work if needed.

JS: Isn’t that a little heavy handed?

AW: Well, since April 2014 all enforcement action now comes under the Taking Control of Goods Regulations 2014 and requires a Notice of Enforcement letter to be issued to the debtor, thus giving them 7 clear days to contact the Enforcement Agent with an offer to pay, or with any potential vulnerability before the enforcement agent attends. These 7 days do not include the day of posting, the day of delivery or bank holidays so in reality it is 10 days+ before any door step enforcement action can commence.

JS: Thank you for your time, Alan – there’s some great advice there.

If you need help setting up your own debt and Invoice recovery procedure or would like to know more about the best debt recovery solution for your business, Alan and his team offer a free, no obligation consultation with free training. 

Contact alan.wood@penhamexcel.co.uk.

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