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Debt Collecting - Soletraders
Creditors - how do they see you and how
should you go about collecting your debtors?
By reading this page to find out what they think of your statements about
non-payment you will also hopefully improve your own debtor collection. See
introduction for how to use the rest of
this site.
Dealing with late payment
1. Introduce a strict policy for debtor collection built around specific
target dates.
2. Assertively collect debts – it is your
working capital
3. Take references up – most do not. We are
amazed at how many businesses fail to ask for references, how many fail to
read and act upon any they get and how lax credit limit enforcement is when
faced with "iffy" references.
4. Buy a subscription to a credit reference
agency early warning system. This is particularly important if you regularly
open new accounts and or large accounts. It is so cheap to do and can save
you, literally thousands of pounds.
5. Refuse to supply even if a "good "
customer is over limits, call them and ask what the problem is. Do they have
the invoice, delivery note and are they satisfied? If yes ask for your
money. If they still don’t pay consider issuing:
5.1.
Final warning letter - you will commence action if you do not hear within 7
days - this helps establish that the debtor accepts the debt.
5.2.
Obtain a County Court Summons form from your local court; issue a copy of it
with all details correctly filled in. (We are amazed at how many people go
to the bother of issuing half filled out forms!)
5.3.
Tell the debtor you will issue the summons in 5 working days unless they
pay. If this fails:
5.4.
Issue the summons to the court. After judgement is granted call the debtor
for the money. If this fails:
5.5.
Proceed with a warrant of execution - basically an instruction to the court
to collect the money (they send a bailiff to do this). If this fails:
5.6.
Consider a winding up petition if the debtor is a company or a bankruptcy
petition if the debtor is a sole trader or individual.
5.7. Up
to the last step above this is a relatively inexpensive way of debt
collecting
6. Build a collection system, use "Sage" or
other accounts package or use a manual system with trigger dates for every
invoice.
7. Charge interest – its your money
8. Remember a good customer who does not
pay is not a good customer long term!
Inevitably the excuses come out - see both sides of the argument below. Also
see legal action page for the opposite viewpoint!
Answers to late payment arguments
"We have not got your invoice please send a copy".
Take their name and position in the debtor company. Fax, post and email a
copy, then call for the person you spoke to and ask when payment will be
made.
"Sorry our computer is down"
Ask how often this happens, how long will it last; please send a manual
cheque on account even if not for the full amount.
"The cheque is in the (ubiquitous) post"
Where, when and by whom was it posted and what class of stamp was used? Set
a reminder in your diary to call again the next day or two days if sent
second class. Again find out why the cheque has NOT been posted.
"We can only pay you when a large debtor pays us"
Get the name and contact details and call the debtor yourself, check out the
story, is it true? If yes ask the debtor when they envisage paying some or
all of the money. Then set a reminder in your diary to call the customer
when payment should have been received.
"We cannot pay we are at the bank limit", or "the bank is not helping us
we have a cashflow problem".
Ask if they know about s123 and s214 Insolvency Act 1986 (insolvency test
and wrongful trading) write pointing this out. Tell them to look at our
website www.companyrescue.com. Refuse to supply until an agreement for
payment is reached.
"The person who writes cheques is away"
Ask the person how other essential payments are made such as utilities and
wages. Get a commitment to pay you too - even some on account.
There are many more excuses but all add up to the same thing - if the
customer cannot pay to your terms they may be insolvent. So beware. If they
are a key customer go and see them; talk together about a plan to recover
the position. You may accept staged payments over time provided that new
supplies are paid to terms.
If they are insolvent and readily admit they have problems with the bank and
the crown then steer clear until the position is resolved.
Be terrier like, never let go until the debt is paid (even in stages) or
they have gone into an insolvency mechanism. Then get full details of the
liquidation, receivership, administration or company voluntary arrangement.
It may still be possible to get your money (particularly in CVA or
Administration). If you want advice on such insolvency situations email us.
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