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Liquidation and Insolvency
Here at AVC Debt Recovery we use these phrases to people when we are asked to collect debts from Ltd companies. Simply put Liquidation and Insolvency amount to the same thing – the inability of a business to pay their debts – but it´s important to understand the differences between liquidation and insolvency. The levels of insolvency vary. For a company it is £750.00, for an individual or a sole trader it is £5,000.00.
Insolvency can be considered a financial “state of being”, when a company is unable to pay its debts or when it has more liabilities than assets on its balance sheet, this being legally referred to as “technical insolvency”. In a nutshell there are 2 forms of insolvency “cash insolvency” and “balance sheet insolvency”. To get our clients paid we see the former as the most dangerous.
Liquidation is the legal ending of a limited company. It will stop a company from doing business, or employing staff.
It is also possible to be technically solvent and unable to repay debt. This occurs when a company is “cash insolvent” and with assets that exceed its liabilities, but unable to source additional funds.
In these case a liquidator can be appointed to administer the liquidation of the company’s assets and to distribute the proceeds to creditors, in accordance with the provisions of the Corporations Act.
A technically solvent business may also go into liquidation when their shareholders wish to realise the value of large accumulated reserves in a tax-efficient way.
In these cases the company is placed into Members’ Voluntary Liquidation (MVL) by a n insolvency practitioner and is appointed as Official Liquidator.
The above differences between insolvency and liquidation show that simply being insolvent doesn’t necessarily provide enough grounds for a firm’s creditors to petition for a compulsory liquidation of a business, legally known as Court Liquidation, as in some cases the indebted may even be paid back.
To start a Court Liquidation process in the UK the value of the debt must exceed £750.00.
A creditor will serve a Statutory Demand (or Winding up Notice or Petition ) on the company to pay a debt pursuant to section 459E of the Corporations Act. Failure to pay the money demanded means there is an “assumption at law” that the company is insolvent which will conduct an application to the Court to have the company wound up, i.e. liquidated.
In all above circumstances, the powers of the directors cease upon the appointment of a liquidator, who immediately takes full control of the business and investigates all actions taken by the directors while the company was trading.
While the approach to corporate governance is diverse from one country to another, in the main the duties and liabilities of European directors have a large degree of commonality so Brexit will not affect this.
Directors of limited companies may find themselves personally liable for the debts and obligations of their company under certain circumstances under the Companies Act 2006, but this is rare and the Registrar of Companies acts rarely. Company directors can also be struck off for periods of 7 years. If a company director is convicted of bribery, may also face imprisonment in addition to being disqualified from holding a director position for up to 15 years.
Here at AVC Debt Recovery and CW Contract Law and Legal we look at the insolvency of the company when collecting debts as our maxim is always follow the money, If you have any debts then our track record of success including the issue of Statutory Demands and Winding up Petitions is second to none.
CW Contract Law and Legal AVC Debt Recovery
Offices in Surey and Dorset: www.cwcontractlawandlegal.co.uk
How Do You Chase Unpaid Invoices?
Here are some FREE tips.
When all else fails call in the expert. Here at AVC Debt Recovery we offer no win no fee on business debt recovery as standard and have a track record of getting monies where other have failed.
When you’ve completed work that the client does not dispute, they should then pay for your services within a reasonable timeframe. That is the basic premise of the world of business continuing to operate.
However your payment terms come and go and suddenly its 3 weeks past your standard payment terms and you still haven’t received the payment. At this moment you may be worrying that a late payer will turn into a bad debt and you are spending your valuable time chasing monies that should be in your account.
Despite the introduction of the Prompt Payment Code in 2014, 23 percent of Britain’s small and medium-sized businesses are still pushed to the brink of insolvency as a result of late payments.
Here are some simple strategies you can employ to get payments in on time while maintaining good relationships with your clients.
1. It’s not rude to chase your invoices
Never be frightened to ask for payment for goods/services delivered and don’t feel you are being rude chasing an invoices is all part of the course. In the early days, it can feel rude to contact a client to ask for payment. It’s not you who are rude asking to be paid it is the client not abiding by the payment terms who is being rude.
2. Set sensible payment terms
Asking for immediate payment means you are chasing the monies before the invoice arrives. We always state using pre payment or 7 days as the minimum. Chasing invoices unnecessarily is a cost.
3. Set payment terms expectations at point of sale or order
No one likes to talk about money, but setting the client’s expectations by discussing your payment terms early on can prevent problems further down the line. Explain when you will invoice the client and what the payment terms will be. Most small companies tend to opt for a 30 day payment term, while larger companies might be happy with 45 or 60.
4. Inform your clients about late payment charges
Make sure you set this out in your Ts & Cs. Government legislation has been introduced that allows small businesses to charge up to 8 percent interesover the BOR base rate. The law allows you to pass any debt recovery costs onto the client, but only for business clients so ensure this is set out in your Ts & Cs if you are swerving domestic clients.
5. Don’t work yourself up unnecessarily
Make a polite telephone call as human error is to blame for most late payments and for larger companies it is often down to scheduling or processes. However remember that agreements trump processes despite what accounts payable try and tell you. Get a payment date form the telephone call.
6. Send them a Late Invoice Letter or Reminder and attach it to an Email.
Your initial payment reminder should be polite and written in the right way. Simply stating that the payment is now overdue is often enough to prompt payment. Something as simple as the following is fine:
Further to our telephone conversation we confirm that Invoice 1001 was due for payment on stated date). Your prompt payment would be much appreciated and for your reference we have re-attached the invoice (and any PO.
Many thanks, Name
7. Send a statement of outstanding cost
If no payment is forthcoming and you do not receive a response from the client asking for an extension, you should then send another email. This time, explain that the invoice is now overdue and include a statement of the outstanding cost adding the Statutory Charge due under the law. The email should still be friendly and polite in its tone.
At this point, you might also want to think about whether this is a debt and its potential to become a bad debt. If you still have outstanding work for the client, you may wish to consider moving it back slightly (without transgressing any contractual obligations, although non-payment should always be a breach without remedy that cannot be used to apply set off of payment). Don’t be a busy fool continuing to work for someone who is not paying you.
8. Give them one last call to chase payment before action
Don’t give them a chance to ignore emails and letters. If you’ve followed the steps 1- 7 above advice above and still haven’t received the money, you need to perhaps ask the question: Is there’s an issue with the payment. It may be that the client is experiencing cash flow problems of their own and wants additional time to pay, so you need to assess the risk factors. Asking the right question should give you a clearer idea of their intentions, and help you decide what course of action to take next.
9. What if they still don’t pay the invoice?
If the client still doesn’t pay, then you need to continue to chase or call in the experts, although don’t let it consume your life or take too much time out of your working day, but make sure the client knows you are not willing to let it lie. If payment is promised, ask for the date it will be made by. You should also cease all work for the client until the invoice has been paid.
10. Should I consider legal action for unpaid invoices?
You may wish to go via the court system yourself, but a good debt recovery company will advise you of your chance sand will act robustly and free up your time. Of course you will have to pay them a percentage, but a large percentage of something is always infinitely better that 100% of nothing and the time and angst that the court process enacts on small traders.
How can we help?
If you have clients who are paying late or you have a later payer who you think might become a bad debt call us now for an immediate free business debt recovery consultation.
(Small companies total 99.9% of all UK companies, some 4.8m. At the last count monies owed over terms was running at over £34bn.)
Agreeing what is agreed at point of engagement usually precludes debts as does invoicing early and chasing payment. This should help keep cash flow healthy, but sometimes polite reminders aren’t enough and the money you’re owed does not appear.
Deciding if and when to take more serious action can be tough for any small business. The good news is that there are options for you and taking your customer to court is a last resort.
You could start a legal proceeding yourself or engage a reputable a debt recovery agency.
To make a claim yourself you can Google Money Claim Online and follow the procedures. Whilst this will mean that if you win you obtain judgement there is no guarantee that you will get you the money as 66% of County Court Judgements are never satisfied.
That is where a debt recovery agency comes into their own as they not only advise on your chances of winning and getting paid, but they increase your chances of getting paid after any judgement.
A good debt recovery agency will handle all correspondence and legal processes on your behalf, taking the burden from your shoulders and good one’s usually offer a “no win, no fee” a standard, but will of course expect to get paid so will take a commission of 155-20% so that means recovery of 80%-85% of your money as opposed to 0%.
Another factor is that in almost cases you cannot obtain costs for any recovery of debts under £10,000 and winning a judgement may give you satisfaction on principle do not pay bills. In many cases a debt recovery agency can get payment where others cannot as good one’s will know the law, but are not charging solicitor’s fees. They will look at your legal cases, the status of the debtor and assess whether there is a collectable debt. If a no win no fee debt recovery agency will not take a debt on then it may not be a recoverable debt. The Late Payment of Commercial Debts (interest) Act 1998 and subsequent amendments allow interest to be added at 8% above base rate as well as allowing reasonable debt recovery fees to be added and this is an enabler to prompt many debtors into paying.
A good debt recovery agency will also give you the option of insolvency proceedings, but this is expensive and if it happens and a and a business is made bankrupt or wound up, other organisations may be owed money too and they will also be eligible for a share of the proceeds.
When the sale value of the assets doesn’t cover the debt, you will only get some of what you are owed. Where the company that owes you money has little or no assets, you might not get anything back, and you should take this and your legal fees into consideration when choosing if it’s worthwhile to proceed.
The rule of thumb for any small business is that you work hard so you should never feel bad about putting pressure on a customer to pay off their debts, and that a customer who has ignored your first phone calls and deadlines is likely to continue to do so unless something changes.
If somebody isn’t going to pay you, and you’re going to spend a disproportionate amount of time you should spend creating money and delivering your goods and services trying to get them to pay you, ask if theirs is the custom you want, regardless of whether you are desperate for business.
Being assertive from a contractual relationship in asking for monies you are owed is not being aggressive. If you are selling then the buyer agreed to pay you then that is unequivocal and non-negotiable. If you are not being paid on time don’t let a late payer become a bad debt.
However, whatever you do if you decide to write you own legal letter don’t be tempted to make legal threats at the law on harassment is quite clear and don’t be tempted to forge a legal letter.
Payday lender Wonga was ordered to pay £2.6m in compensation to customers after it sent out fake legal letters.
A good debt recovery agency will never make idle threats against debtors and only ever set out the full force of the law of contract. Legal action is always the last resort when everything else has failed.
Prevent Late Payments Going Forward
Take these simple steps to improve your chances ensure timely payments in 2019.
Use invoice templates to create consistent templates that look professional. Keep them streamlined so key information (amount, due date, where to send payment, etc.) stands out.
Make sure your invoices are complete and correct. Double-check things like PO numbers or references agreed and especially who the invoice should be sent to and the address. Don’t let an over eager salesperson overlook this. Many invoice payment delays are due to honest mistakes.
Try invoicing as soon as the work is completed or product delivered. Unless you have a different agreement with the client (such as sending one monthly invoice), this is a good way to get paid faster.
Unless you are getting pre payment then immediate often adds costs to the collection process as effectively you need to start chasing before the invoice is processed, so incorporate a reasonable payment retime such as 7 days.
Reference the Late Payment legislation in your Ts & Cs and be prepared to enforce the provisions of the Late payment Act(s). If you haven’t got a set of Ts & Cs.
For more tips visit: http://www.avcdebtrecovery.com/business-debt-recovery-about-us/articles-postings-and-blogs-debt-recovery-debt-collection-contract-law-business-terms-conditions/
Reasons Why an Invoice is not Paid On Time
A lot of businesses find themselves wondering why their invoices are not being paid on time. With the doomsday scenario of Brexit being thrown at us every day some companies do not need another excuse not to pay you late. S some business will go through tough phases in their financial year which could lead to invoices not being paid. However, there are usually an underlying reasons as to why they do not pay you on time.
A lot of people good at selling forget this. Payment should be set out in your terms and conditions and if you are one of those companies that do not have terms and conditions then set it out in an email or letter. Here in England we seem embarrassed mentioning sex or payment terms but do not let English reserve (as set out by John le Carre in Tinker Tailor Soldier Spy) stop you being clear about what is required for payment and when.
A lot of businesses are very laid back when waiting to receive payment on their invoices which a lot of debtors take advantage of. If your business has a laissez-faire pay me later approach, this gives the debtor an opportunity to leave your business as its least priority when it comes to payment. Make sure your business practices align with your agreement set out in Pint 1. Never be frightened to remind someone that an Englishman’s word is his bond and as such payment is due and you expect invoices to be paid on time.
One of the primary reasons for debtors to pay late is the dissatisfaction of the service/product they have received. In addition there could have been complications to the service or product which lead to an unwilling debtor. For example in some areas such as construction or service industry there can be interpretation of the status of the deliverable. Again Ts & Cs with a properly set out disputes procedure will help to ameliorate this. Having processes also helps to ensure satisfied customers.
One of the common reasons for late payments is an occurring issue of cash flow from businesses. It is important to communicate effectively with customers to find the reasons as to why they are struggling with cash flow issues and perhaps offer a payment plan as a gesture of goodwill, notwithstanding that establishing best practices at point of sale often precludes the company citing cash flow as your issue.
Under the Late Payment of Commercial Debts (Interest) Act 1998 and subsequent amendments, companies can claim interest and also receive fixed sum compensation if a payment is not received or if a payment is late. Although the law is there to protect businesses from the damaging effects of late payments, some companies (especially small traders) seem reluctant to us it. In some instances, people assume that instigating debt recovery or hiring a debt recovery company will harm commercial relationships.
1. Draw up a list of the key commercial terms that you wish to operate with your customers.
2. Remember your Ts & Cs are about setting out how you wish to trade.
3. Draft bespoke, don’t nick or copy others on the internet.
4. Think of Amazon. Millions of products billion dollar profits one concise set of Ts & Cs.
5. Think of all the scenarios of what could possibly go wrong and then set out what you would do in each case.
6. Imagine the most difficult customer scenarios possible in doing this exercise.
7. Think about how you do business, not the legal clauses as this is where business falls down, not the legal; wording on force majeure and severability
8. Put yourself in the shoes of your customers and make sure the language is at their level and user friendly. Hiding everything on one page in the smallest font possible will not endear you to your customers and is not best practise.
9. Always put in what you will do if you do not get paid. Think about adding the cost of recovery and interest to late payers.
10. Don’t forget about revisiting form time to time. Revisit and update, as and when required.
11. When in doubt, seek help.
12. Visit www.cwcontrcatlawandlegal.co.uk where you can obtain a bespoke set of Ts & Cs for as little as £180.00.
The time it takes to pay suppliers across the UK has improved by 14 per cent, with payments taking on average 42 days in 2018 compared to 49 days in 2016. The data compiled by Tungsten Network, a global e-invoicing provider, shows that the time from invoice submission on its network to payment has steadily improved since 2016, coinciding with the UK Government requiring larger businesses to start reporting their payment practices in April 2017.
Figures also show the UK is performing much better than the rest of the Europe with payments being made in 42 days on average versus 52 days on the continent but lags one day behind the US. In producing the data, Tungsten Network has analysed more than 19 million global transactions involving 100,000 businesses that have passed through its e-invoicing platform since 1 January 2016.
Of the transactions analysed, 19.4% of the 1.69m payments made to UK suppliers have been from FTSE 100 companies, which take on average 42 days to pay UK suppliers, the same as the current overall average for the UK.
Prompt payment is crucial to all businesses large or small, so it’s encouraging to see from data that the UK payments culture has seen some improvement over the past two years. Nevertheless, instances such as the collapse of Carillion indicate that late payments to suppliers continue to be rife in certain sectors of the UK economy.
The decision by the government to push for greater transparency of payment practices among larger businesses shows positive intent. It will be interesting to see whether the government’s proposal, encouraging large businesses to appoint a board member to be responsible for making sure invoices are paid on time, has any impact on the payments culture across the UK.
When you are in the early days of starting up your business, there’s a never-ending list of tasks to complete. Sorting out the terms and conditions of trade is not at the top of people’s list although it should be. Getting your product market ready, finding customers and marketing your product take priority in the start-up process.
Neglecting this less glamorous part of your business, however, could impact your cash flow through delayed payments and having to pay for materials before taking payments.
In a worst-case scenario, you could end up spending lots of money waste your valuable time on debt collections then realise the late payer is a bad debt. . A bespoke set of Ts & Cs from CW Contract Law and Legal will cost you around £220.00, so why take the risk.
Late payment is a fact of life for small businesses, as customers often give lower priority to bills from small firms. With the right terms in place, however, you can ensure that you get paid first. Get your terms right and there’s no excuse for slow payments.
Protect your business
If you don’t specify terms and conditions you put yourself at risk of uncertainty, misunderstandings and the word ambiguity! It is crucial to establish the actual arrangement between the two parties involved in any deal. You need to cover yourself, so clients or partners have no opportunity to go back on their word (some will anyway, so reduce your risk at point of agreement of sale).
If there is nothing in writing there is no proof. If the terms are in writing, it is evidence you can produce if you need to.”
In a nutshell terms and conditions protects you as a business and have an important role to play, so much so that there are huge numbers of precedents about terms and conditions within contract law. They define all matters and the duties, rights, roles and responsibilities of the parties involved in any agreement or contract.
What to include
Look upon simple well drafted Tso & Cs akin to Channel 4 bake off.. A recipe for a good cake without a soggy bottom – a recipe for doing business and having absolute clarity on your business agreement and the way you wish to do business. They should set out what the agreed terms are between parties and more importantly what happens if things go wrong or one party wants to leave or is unable to continue. Terms and conditions can also save a lot of money by addressing all the facets you want included at the outset. This in turn avoids disputes later on about what might or might not have been agreed.
The exact elements to include depends on the individual business but you should consider including:
a. A clear definition of what products or services will be provided
b. Setting out the payment terms – when is payment due
c. Any guarantees or warranties offered
d. Timelines for delivery and any queries
e. Specifying what happens if either party doesn’t deliver or pay or wants to end the relationship
f. The term of the agreement and what notice is required to get out of it
g. Which law shall govern the contract
Some things must be included on the invoice. There is a legal requirement for invoices to set out the business name and address as a minimum. Additionally, if they are a limited company they must set out the company name; the company number; where it is registered; the registered office address, which may be different to your actual trading or correspondence address. If you want all the names of the directors include, but all the names of the directors — not just some of them. If the business is registered for VAT, it must state the VAT number.
There is no legal requirement to include terms and conditions on invoices though many people put their terms on the back of them. However, if you send your invoice 30 days after delivery and the other party has sent over their terms their s will prevail so we say send over your Ts & Cs at point of agreement.
When things aren’t clear
Failing to specify terms could have a serious impact on your cash flow. You may end up in a situation where the customer thinks they will pay at the end of the project and you think you are being paid at the beginning or in stages, so you could end up having to pay for materials and staff before you have received the money from the customer.
“Equally, if you do not specify so in your terms, you may have no right to charge interest for late payment, so again you will be out of pocket if a customer pays late.”
One size doesn’t fit all
It is crucial to make sure your terms are specifically written for your business – you can’t assume another business will have the same needs as yours. Some people take flyer and cull someone else’s of the internet. Whilst there is a lot to do when starting a business it pays to get your Ts & Cs right at the start and update them as you grow.
When you are in the early days of starting up your business, there’s a never-ending list of tasks to complete. Sorting out the terms and conditions of trade is not at the top of people’s list although it should be. Getting your product market ready, finding customers and marketing your product take priority in the start-up process.
Neglecting this less glamorous part of your business, however, could impact your cash flow through delayed payments and having to pay for materials before taking payments.
In a worst-case scenario, you could end up spending lots of money waste your valuable time on debt collections then realise the late payer is a bad debt. . A bespoke set of Ts & Cs from CW Contract Law and Legal will cost you around £220.00, so why take the risk.
Late payment is a fact of life for small businesses, as customers often give lower priority to bills from small firms. With the right terms in place, however, you can ensure that you get paid first. Get your terms right and there’s no excuse for slow payments.
Four Good reasons to outsourcing debt recovery
Many businesses wonder why they should outsource their debts. Why should they pass or leave their debts to an external source instead of dealing with it themselves? Collecting debt and effective credit control sounds simple, but when looked at closely it really is not. There are a lot of reasons to why companies can’t deal with recovering debts and we are in place to offer you a solution.
We have reasons to believe that companies should outsource their debts to us. Here are 4 reasons. Our solutions offer businesses a logical way of dealing with debt recovery. Here is how
1.It Minimises costs
Every company has a budget but our budget is that we are so confident of our ability to collect debts that we offer no win no fee as standard. Also within our small team here we have people who know numbers and run businesses so we understand fixed and variable costs. We also say that recovering 80-85% of something is always better than 100% of nothing. We offer a free LBA and as part of our service we will offer advice to those who want to go it alone. Since started trading many clients have used our free LBA effectively
2. It Saves Time
All the best companies are created by those who can sell. Selling and creating is a skill. In the same way you would not ask Harry Kane to play in goal we ask why those who develop their companies by being sales and creative focused seek to do their debt recovery. We have the resources that enable you to do what you do best. At AVC Debt recovery we are able to communicate with debtors locally and internationally whilst using the correct procedures in recovering the debt owed. We work diligently in recovering your debts without any hassle for you.
3. Reduce your stress
Debt recovery is frustrating and stressful for businesses and interrupts a lot of plans in all types of businesses especially SMEs. We have worked with many businesses from different sectors which gives us the expertise in recovering debt for all our clients. We take the weight and pressure off to enable them to move forward and achieve their goals.
4; See the results
By outsourcing your debt to us, you will find that your business will become more proactive knowing that this important facet is taken care of. We offer fixed credit control packages or the best value debt recovery in the business. Try getting no win no fee in SEO or marketing. By choosing to be our client you will also find that you will have more time to dedicate to other aspects of your roles in your market and your productivity will flourish.
The total value of UK business judgments rose sharply - by 25% - during the first quarter of the year, according to figures released today by TrustOnline.
Over the same period, the number of online searches by people checking judgment status grew by 7%, compared to Q1 2017, to just under 75,000
TrustOnline is the only online source for UK judgment information about other people and businesses.
During Q1 2018, just over 33,000 business judgments were registered in the UK, 8% more than the total issued in Q1 2017. The average value of a business judgment also increased, rising by 16%.
As a result of these changes, the total value of UK business judgments in the county courts sharply rose by a quarter compared to the first quarter of 2017.
These statistics cover county court judgments registered in England and Wales; simple procedure, ordinary cause and small claims decrees registered in Scotland; and default and small claims decrees from Northern Ireland.
Malcolm Hurlston CBE for Trust Online said, “Judgments against businesses clearly show failure in financial management. This quarter's increase is a warning sign and it would be good to see an equivalent rise in searches.”
During Q1 2018, TrustOnline handled 74,649 online searches from the public for judgments in the UK; many more are expected in 2018 with more judgments to search and a mobile friendly version ready for launch. A search of all UK registers costs £10; a search within one of the following three jurisdictions: England and Wales; Scotland; or Northern Ireland, which is likely to be enough in many circumstances, costs £6.
This article was originally published as a BLOG by Yuill & Kyle, Glasgow. 05 June 2018 Written by macroberts
Why Terms and Conditions are Imperative
The revelation that 89% of councils are in breach of the Public Contracts Regulations 2015 has emerged from a freedom of information request submitted by the Electrical Contractors Association (ECA) and the Building Engineering Services Association (BESA).
This reinforces why every business should have a set of terms and conditions and simply send them as an attachment to your confirmation by email with the phrase; please find attached our terms and conditions. This applies to all services delivered , marketing digital marketing, and other service delivery, not just construction trades.
It is also revealed that 49% of local authorities do not have, or do not know whether they have, a built-in contractual requirement for 30-day payment. In fact, 18% of councils say they have no absolutely no intention of building in contractual requirements for 30 day payment.
This is despite the fact that the Public Contracts Regulations 2015 state that 30 day payment down the supply chain is mandatory, and that public bodies should take steps to ensure this takes place.
BESA public affairs manager Alexi Ozioro said: “There has been much talk of the payment culture change needed in the industry, and public bodies need to lead by example. The industrial strategy calls for a fairer payment system, the Chancellor has highlighted the need to tackle late payments and a Crown Commercial Services consultation even poses excluding bad payers from public contracts. We applaud the government for engaging with the poor payment debate, but it is about time action matched words.”
ECA deputy director Rob Driscoll added: “Non-compliance by the public sector with the Public Contracts Regulations is unacceptable. This is especially significant given the cautionary tale of the collapse of Carillion – one of the key strategic suppliers to government – which ultimately had a wider impact on SMEs.
This article was first published on 17 Jul 2018 in Construction News.
A new report released has revealed details of a whopping £9bn lost to scammers as a result of fraudulent invoicing and scam debt recovery.
The report, compiled by Tungsten Invoicing Network, was conducted with over 1,000 companies contributing to the findings. A massive 47% of companies stated they had been contacted with ‘fake’ invoices for payment with 54% of companies questioned citing business fraud as the biggest threat to them.
If this is extrapolated out to the total list of SME’s in the UK that is a staggering amount of fraud.
Rather surprisingly, only 44% of businesses said they would contact the Police or Action Fraud if they received a dodgy invoice whilst 13% admitted they would not know how to deal with the situation.
Typical invoice fraud methods used by con artists and scammers include fake invoices, email phishing viruses hidden in attachments, false changes to bank details and duplicated invoices.
It is estimated that 43% of all cyber attacks are aimed at small to medium sized businesses who are often so focused on their business that they may not be alive to the tactics of the fraudsters..
Head of Action fraud Pauline Smith said “It is important that employees are made aware of invoice scams and are ready to recognise the signs of fraud. Incidents of invoice fraud are underreported and therefore it is difficult to know the true scale of this fraud type”
She continued “However, what we do know is that this type of fraud prevails across all types of business and no one type of industry is immune”
Anybody experiencing or receiving dodgy emails with requests for payment are urged to visit the website of Action Fraud for advice and assistance.
Action Fraud warn of new Debt Collection scam
Cyber Police Action Fraud have warned Small Businesses and sole traders to be on guard against a new Debt Collection scam in which financial fraudsters claim to be recovering debts on behalf of legitimate bailiff firms.
The audacious scammers call companies claiming that fees have not been paid for bogus advertising subscriptions or directory insertions. The plausible fraudsters then claim to be bailiffs and Enforcement Agents acting on behalf of acting Debt Collection Agencies.They then proceed to advise that there is a unpaid County Court Judgement and quote the amount and state they will be enforcing it by way of removal of goods and suchlike.Such is the audacity of the criminal fraudsters, they have even been using the actual real names of authorised Bailiffs and Enforcement Agents.
The fake Debt Collectors then demand sums are paid via bank transfer. If the victim refuses, the fraudsters then threaten to visit their premises and even their homes to secure payment of the purported debt.This should alert most people as the law is quite clear about the issue of paperwork.
Action Fraud, the UK’s Anti-Fraud and Cyber Crime reporting Agency advised there have been 52 reports so far pertaining to this debt collecting fraud with a range of different businesses and individuals targeted so far. The advice AVC Debt Recovery give is that if anybody receives any unexpected and suspicious calls they should ask for return contact details then contact Action Fraud immediately if they are not able to verify the authenticity of the callers claims.
6 Questions to Ask When a Customer Says They Didn't Receive an Invoice
As a credit controller in your company or a small business chasing payments, you probably have more than enough tales to tell about debt recovery. Even so, there might be a new situation and you may be presented with excuses as to why an invoice has not been paid on time.
One common statement is that the customer never received your invoice after you sent it out on paper or in e-invoice form. While it's true matters could occur where an invoice goes missing, some customers might use this as a way to avoid paying a bill on your due date.
Despite the time cost of collecting these late-payments, and it may have to involve lengthy phone calls it is worth the time effort, because you have a way to determine whether there's truth involved or not.
We find that a definitive methodology and checklist gets better results.
1. Where Should Invoices Normally Be Posted?
If the customer thinks you lost the invoice, you need to ask them which address you should send your invoices to on a regular basis. Maybe they have another address they prefer if they don't check their email or letter box often.
By asking this question, you'll know you sent your invoice to the right place rather than having the tables turned.
2. Have You Changed Addresses Recently?
It’s a simple one, but this often happens. Ask them when they moved and what their new address is. Be sure to remind them that they need to contact you if they move again so there isn't any future misunderstanding.
3. Who Should You Send the Invoice To?
Invoices and paperwork can get lost within a company. Having the name of the person in accounts payable ensures your invoices gets to the member of staff able to authorise payment straight away.
4. Is There Any Other Issue?
The customer may tell you they don't have a copy of your invoice and that they couldn't pay it until they receive one. You'll want to ask them if this was the only reason they haven't paid right away. If they say yes, then it's time to send them a copy immediately with a promise from them they'll pay.
Asking this question gives you a good way to receive your money once you send them a new copy of the invoice. It makes it tougher for them to come up with other excuses for not making a timely payment.
5. Can You Pay The Invoice Immediately After Receiving It?
This is the same as asking who is going to pay the bill at point of sale. You need to ask the customer whether they can pay the bill as soon as you send them a new copy. By holding them to this promise, you'll place it on record that they committed to pay once they received the new copy you send them.
Should they not pay at this time, you'll have enough records to show you're in the right to add a late charge for deliberately not paying on time.
6. Should I Email or Fax the Invoice?
The faster you can get the invoice to the customer, the better. Sending these in real-time doesn't provide any excuses for the customer not addressing the invoice. It's why you should ask the customer if you can email or fax the invoice to them – then follow up to confirm they have received it.
With the high street giants taking a battering via Maplin and Toys R U with both B & Q and Carpetright feeling a cold wind a warning has been issued that business insolvencies are expected to rise in 2018. Here at AVC Debt Recovery we urge all companies to adopt a more pro-active strategy to deal with the scourge of late and non-paying customers.
Dun & Bradstreet recently highlighted the continuing problem and according to their research, 58% of British Businesses are currently at risk of insolvency due to non paying clients.
Here are the most common excuses we have come across.
The most common excuses will come as no surprise to some but others may cause a raised eyebrow.
Top Ten most common excuses for late payment:
1. The cheque is in the post – The tried and trusted classic.
2. Didn’t receive invoices – Easy send again by email. Have it to hand and press the button on the spot.
3. We originally disputed the invoice – Seek the proof and sort it.
4. Account signatory is absent from work – Get the named person who fills in for them
5. They’re not available or in a meeting– The person you need to speak to about payment, never seems to be available. Seek their direct email.
6. Waiting to be paid myself – Commonly used amongst the sub contracting sector, but not an excuse. You are not sharing their profits so why share their liabilities or their poor cash collection.
7. No payment run not till the end of the month – Cannot be used if you sent Ts & Cs setting out payment terms.
8. Our payment terms are 90 days – Cannot be used if you sent your Ts & Cs and sorted out payment terms at point of sale.
9. The invoice has already been paid – Ask for the date of payment and have your bank statement open on the call.
10. Technical difficulties – The modern equivalent of the dog ate the invoice. Always set out that you know about technology, so ask what system they are using then ask to speak to their IT man as that doesn’t sound right
There is no doubt that all businesses need to become more pragmatic and proactive when it comes to the problem of late or non-paying clients and to those worrying about losing a customer who does not pay you we say: “… if someone stops dealing with you because you ask for payment for goods and/ or services do you want them as a customer.
We are of the opinion that no business has ever lost a customer simply because they were required to pay what they rightfully owe.
Don’t forget Late Payment legislation enables you to add statutory charges for each invoice issued,
Standard Terms and Conditions of business (Ts & Cs) are often given a zero or low priority low priority by sole traders and companies, yet they may be the best few hundred pounds any business ever spends. Companies who would never dream of leaving their front door unlocked with their computers on display do exactly that when they work without terms and conditions. How many of us take the risk of going on holiday to USA without health insurance? Many sole traders and operate with and open season on risk by not having Ts & Ccs.
Many only give detailed consideration when a dispute arises, by which time it may be too late. In the meantime everybody keeps making sales which may leave a huge potential risk. We also have the companies who steal someone else’s off the internet when they may be wholly unsuited to their needs and may even be stealing a stolen set which were themselves poorly worded and legally weak..
Standard terms and conditions of business may be used in order to achieve any one or more of the following commercial objectives:
1. To set out a framework for how your transactions will be dealt with and brought to a conclusion without the additional time and expense involved in drawing up specific terms for each individual transaction.
2. To ensure that payment terms are clearly set out and the charges for those companies that do not pay on time. .
3. To enable a company to impose terms favourable to itself on others without negotiation and, in particular, to limit its liability (in the case of sale terms) or to extend the liability of the seller (in the case of purchase terms).
4. To provide certainty in relation to transactions which form the main offer through the use of the same set of terms in all cases.
5. To standardise a company's contracting procedures, so as to preclude ambiguity and enable anybody to agree a sale without worry if everything is covered.
Whilst a set of Terms and Conditions cannot exclude anything that cannot be excluded by law. It is important that everybody large or small looks at the value of using Ts & Cs.
Here are some standard issues that you might wish to consider:
· Payment terms
· Late Payment Charges
· Quotes parameters
· Services provided
· Warranties and indemnities
· Retention of title; risk and insurance
We always reference Amazon. What is the last thing you must do before you are allowed to buy? Tick the box that states s you must agree to their Terms and Conditions.
Protect Your Intellectual Property
Many of us have watched the film The Social Network? Which sets out how Mark Zuckerberg, hired by the creators of Facebook, stole the original idea and became Facebook’s owner?
Remember the conversation between Bill Gates and Steve Jobs where Bill Gates asked Steve Jobs if he could borrow his operating system and Steve forget to insist upon a license or set out his copyright for the IP rights that ultimately became the ‘windows’ operating system.
Ideas are not copyrightable. So, what is?
In 2014, Forbes Commentators claimed that around 80% of a Business' values are determined from intangible assets.
Here are some different areas of Intellectual Property:
Copyrights arise naturally if you can prove that your work is original and situated on a fixed medium.
2. Design rights
Design rights need to be registered and they relate to the physical configuration and texture of a shape. For example, Coca Cola's bottle is protected and cannot be replicated.
Trademarks give you an exclusive right to a certain business good. Examples of this are Nike's tick symbol and Apple's logo.
A patent is essentially a trademark for a new invention or original idea. Assuming you are the first to develop it you are entitled to its patent and it cannot be copied.
Non disclosure agreements are contracts between you and an external party to ensure that neither discloses specific information.
If in doubt set out what you have in a simple document and never scrimp on the legal’s for the above mentioned five points. It might not cost you the billions it cost Steve Jobs, but he could afford it. Could you?
Terms and Conditions: Why You Should Have Them
What can T&Cs do for your Business?
1. They can limit your company's liability
2. Protect your Intellectual Property rights
3. Clearly outline rights and obligations
4. Ensure compliance with relevant regulations
… and most importantly .... protect and minimise legal action issues.
Why Do You Need Terms and Conditions?
Lawyers will put in lots of clauses that are legally required, but the most important area for any business is your ways of working.
We have never seen any agreement or contract fail on the legal clauses (e.g. Waiver or Severability), but they have on Termination or payment terms.
Your Ts & Cs should be bespoke to your business and specific on Deliverables, Liability, Termination and Dispute Resolution.
For the full text of this article visit more on this article
Terms and conditions do not require signature to be legally valid so if you are a small business who does not want the expense of contracts and use email or letters to set out what is agreed then just use the phrase: “Please find attached our Terms and Conditions”, and attach them.
Jim calls you and wants 2 ton of sand delivered.
A simple email confirming all the details and price agreed and the phrase … please find attached out terms and conditions.
In the Ts & Cs always set out you payment terms and what the remedies are if you are not paid on time.
The law allows you to add interest on later payments, so set out what percentage rate above the Bank of England base rate you will apply.
If you are selling B2B then The Late Payment of Commercial Debts (Interest) Act 1998 allows you to add 8% above the BOE base rate.
If your Ts & Cs don’t have dispute resolution get them in.
If you are in IT or other areas where intellectual property (IPR) is important make sure the clause as written matches your business, as we have seen many business copy Ts & Cs from the internet for free.
Remember Steve Jobs lent Bill Gates his operating system without any IP rights.
Finally, always set out the jurisdiction and if you get sent a set of Ts & Cs check the jurisdiction and the seat of any arbitration. Better to arbitrate under English law in London than the law of the State of New York in New York.
Ts & Cs either sending them or getting one’s sent checked (just google contract checking service) is probably the best investment you’ll ever make. As we say what’s the last thing you must do before you are allowed to purchase from Amazon? – tick the “I agree” terms and conditions so if it works for a multibillion dollar company then don’t reinvent the wheel.
Cash is King Get Paid on Time for the Goods or Services you Deliver
Late payments can wreak havoc on your business, but fortunately there are ways to ensure your clients pay on time
Cashflow is a critical concern for small businesses. Healthy cashflows provide all businesses with day to day stability and the confidence to move forward with significant business decisions, such as investing in new equipment or hiring more staff.
In an ideal world, customers would pay on time and income would remain steady but that doesn’t always happen.
Late-paying customers can easily wreak havoc on small companies’ cashflow, causing a whole host of knock-on effects that risk negatively impacting business growth.
What’s more, having those uncomfortable payment-chasing conversations causes stress, can be time consuming and distracts businesses from more productive business activities.
It is not a small problem as UK SMEs are owed an estimated £500million pounds in unpaid invoices, according to a report from MarketInvoice, an invoice-finance platform.
According to BACS the system responsible for bank-to-bank payments in the UK it is estimated that, the average UK SME is owed £36,186 in unpaid invoices, according to data from Bacs. They also set out that 60% of SMEs have faced issues with chasing overdue payments.
These figures may point to deeper problems within the UK’s business culture and this is serious for many smaller businesses. Customers pay late for a wide range of reasons, from pure forgetfulness, to their own cash flow issues (I can’t pay you because I have not bene paid is one we hear all the time) , and everything in between. But the end result is the same: you and your business doesn’t get paid on time.
There are some common sense ways SMEs can implement common sense procedures to improve their cashflow and reduce late payments.
Make payment terms clear from the start, by defining them in a contract or a set of Ts & Cs. All businesses should have Ts & Cs. When we say contract a simple letter or email setting out payment terms and interest chargeable on any later payment ts is a powerful contract under English law. Being British we sometime apologise when asking for money, but every good salesperson or service provider should never be afraid to ask who is paying me and when.
Terms should always include the full amount due, due date and any penalties for late payment. We call this PREASS Preclude Ambiguity at Source of Sale. This stops customers claiming that they ‘didn’t know’ the invoice was due.
Invoice a soon as you have done the work or as quickly as you an afterwards. Always put payment terms on the invoice, and double check your invoices for accuracy to avoid anything that may cause unnecessary delays.
Don’t back down. If you state late fees, make sure you implement them. The law on late payment is there for a reason. You shouldn’t need to be fearful or apologise when applying it. Would a customer seek a refund if something was not right? According to the UK government, customers must pay within 30 days of receiving your invoice, unless a different payment window is agreed. You also have the right to charge interest of 8% plus the Bank of England base rate on unpaid invoices under late payment legislation and much easier to implement if it is contractually set out.
Make paying easy
Be clear on payment and make sure the customer is able to deliver what you are asking them to do. No good sending BACs details to a business that only pays by cheque. Set the payment details out in any contract and put them on the invoice. Let your customers choose their preferred payment method, then set up a system where they can pay you instantly. Send them payment reminders before every payment is due and make sure your bank information is displayed clearly and accurately on every invoice.
Cashflow problems can be really damaging for your business as you can run a business without profit, but you can’t run a business without cash. Use common sense and simple procedures to be ahead of the game in getting paid on time. so it makes sense to take common sense procedures to handle late-paying customers. The wide range of tech solutions now available offer you plenty of choice for your ongoing business needs. Solve your cash flow challenges today and tomorrow will be an easier day
This main text of this article was taken from an article originally written by GoCardless, the UK’s leading direct debit provider.
If you charge compensation for collecting overdue debts then read this
Most creditors are familiar with the Late Payment of Commercial Debts (Interest) Act 1998 which entitles them to interest for late payments and the right to claim reasonable debt recovery costs, unless the supplier has acted unreasonably. In addition to the foregoing creditors can also charge compensation for the recovery of a debt. The Late Payment of Commercial Debts Regulations 2013 provides “If the reasonable costs of the supplier in recovering the debt are not met by the fixed sum, the supplier shall be entitled to a sum equivalent to the difference between the fixed sum and those costs”.
The difficulty is, of course, in being able to take court action against a debtor and include, as part of the sum sued for, ‘debt recovery costs’ as these actual costs have not yet been incurred. A similar point was raised in the case of BHL V Lenmi ABL Ltd  EW HC 1871 QB which involved debt factoring. The facts of the case were as follows: Leumi ABL Limited (the “Factor”) entered into a factoring agreement with Cobra Beer Limited (“Cobra”). Sadly Cobra had financial problems so their parent company BHL signed an indemnity agreement in favour of the Factor. The terms of this were that BHL agreed to indemnify ABL for all amounts due under the factoring agreement.
The factoring agreement contained clauses permitting ABL to charge a collection fee of up to 15% if ABL required Cobra to repurchase any receivables and Cobra failed to do so within 7 days of such a demand. This collection fee was in addition to any other fee payable by Cobra to ABL which Cobra expressly acknowledged constituted a fair and reasonable pre-estimate of ABL’s costs and expenses in providing such a service to Cobra.
Following ABL’s demand that Cobra repurchase all of the receivables under the agreement which Cobra failed to do so within 7 days, ABL took over the collection of the receivables. They notified Cobra that it would be charging a collection fee of 15% of all receivables collected.
ABL collected Cobra’s receivables in the total amount of £8,000,000 and charged 15% of the amount collected. This resulted in a collection fee of £1,200,000.
Cobra’s Parent BHL initially pad a substantial portion of this collection fee amounting to £950,000.
However BHL has second thoughts and sued ABL arguing that ABL were not entitled to charge a collection fee of 15%, that they had paid this money by mistake, and that ABL should return the amount paid.
The court decided ABL was not entitled to charge a collection fee equal to 15% of the amounts collected and found that their actual collection costs and expenses for the collect-out were £33,260.
The Court held that ABL’s collection fee should be no more than 4% of the amounts collected, which worked out to £320,000. Following adjustment to the court process the Court ordered the Factor to repay £735,000 to the Parent plus interest.
Why did the Court come to this Decision?
The court held that the purpose of the clause was to enable ABL to recover future costs and expenses to be incurred by them if they had to collect the receivables. As such these costs, by their nature, had to be an estimate. However the agreement provided that this fee could be incurred prior to ABL actually incurring those costs. As such the court would allow ABL a degree of flexibility because they would be unaware what the collection costs would be.
Of course the obvious issue was that the agreement allowed ABL to set the recovery fee in respect of future recoveries. As such the court were of the opinion that ABL’s discretion had to be qualified to prevent their discretion being abused. In the court’s opinion ABLS were required to identify the likely collection costs and to attribute such costs as a percentage of the sum to be collected.
Because ABL had always charged the maximum of 15% automatically, in the court’s view ABL had not exercised any discretion. In passing judgment the court said what they needed to do was not to establish the actual costs of collection but what these might be if what that percentage would amount to if ABC were acting reasonably. After hearing expert evidence in the court’s opinion 4% was the maximum which ABC could have charged if they had exercised their discretion reasonably.
If the same reasoning is applicable to the Late Payment 2013 Regulation it is clear that whilst there may be an entitlement to charge compensation in terms of the Regulation the actual amount will have to be reasonable. The creditor may well have to demonstrate this to the Court. The practical difficulty is that the actual amount could become the issue in itself in debt recovery litigation with the claimant having to justify that the estimated compensation is reasonable. So it may be advisable for claimants to select a realistic estimate for compensation and be prepared to justify this to the court rather that selecting an exorbitant amount which will not be tolerated.
Debt Reminder Letters – Step by Step Approach
If you consider yourself the kind of business that finds it difficult having to deal with customers or clients who have an outstanding account or an unpaid bill that needs collecting, then you not alone. It is a fear of upsetting someone or losing a customer for daring to ask for what is yours affects many people in business.
No one likes to risk destroying customer goodwill by having to request assertively or demand payment, but in many cases, there is no other option.
Before you find yourself having to go down that route though, there are steps you can take beforehand to try and avoid the situation escalating to such a level.
Ensuring that payment due by dates and terms are clear, and also indicating any interest that will be applicable if payment isn’t made by the date agreed will go a long way to helping this part of your business run a lot smoother.
These should be clear in your Ts & Cs and we say to all natural salespeople who run businesses: Never be frightened to set out what payment terms are at points of sale.
Even taking these steps can’t guarantee that you won’t run into issues, and when that happens you’ll want to take an approach that is both firm, but doesn’t run the risk of souring relations with a valued client or customer.
Step 1 - Keep It Friendly & Informal
The first step should be to issue a short, friendly reminder along with another copy of the invoice. Many times an unpaid bill can be a result of the client simply forgetting. We all know that running a business is time-consuming, and it’s easy to forget what needs paying on what date. In most cases this will result in an apology and payment being made, which is the ideal outcome.
If payment isn’t made within a few days of the letter being delivered, a more direct approach may be required.
Step 2 - Be More Direct
Your second letter should be a bit more formal, and with directness replacing the friendly tone of the first notice you sent them. At this point, the failure to pay what is owed can’t be put down to forgetfulness.
Step 3 - Introduce The Threat Of Legal Action
If payment still isn’t forthcoming, you’re going to have to get tougher, laying out a set date by which payment must be made otherwise legal action may be the result. Usually, payment within seven days is a more than reasonable demand, giving the client time to read the letter and act upon it.
Step 4 - Issue A Final Notice
If the threat of legal action hasn’t prompted payment to be made, then you issue a final notice demanding payment and setting a date whereby legal proceedings will be launched against them.
One piece of advice that will prove valuable is to not lose your composure or get personal when writing these letters. It won’t make you feel better, but will definitely lose you the customer whereas the law is respected. So keep it professional, and to the point.
If you find this process draining and it is taking valuable away from your business expertise and skills as well as other customers then the best option is going directly to a reputable debt collection company who can take the stress and hassle away from you. They also have far more experience in these matters and know how to approach such clients in a manner that will see a speedy and satisfying result.
Credit Control and Further Action
You issue an invoice, chase then get to the end of your credit control procedure and you still have some unpaid accounts, so what are the options?
Is your customer giving reasons for not paying?
Sometimes things go wrong or your customer has a complaint, rightly or wrongly. So, the first question is whether or not they have a genuine complaint. If they have then fix it and analyse the reason for the error and put in place measures to preclude it happening again.
Is there is a good reason?
If your customer has a good point then sort it out through negotiation. Always aim to have a disputes resolution process in your contracts and/or Ts & Cs, so you can refer to that.
There isn’t a good reason or the debtor doesn’t respond
If your customer is unresponsive or the points raised are not good reasons for failing to pay, your options are as follows:
You will need to start with a Letter Before Action (LBA). This is a letter telling your customer that the next step will be court proceedings, if the matter is not resolved. Court rules give details of the information that should be given in the letter. From October, there will be special requirements for a letter before claim to an individual, including a sole trader.
If you start an action and your customer doesn’t file a defence you will be able to get judgement in default of defence.
Sometimes an unresponsive debtor, when sent a court claim form (even though they have no real defence), will file a defence that raises issues which may or may not be true. The law says that everybody is entitled to a civil hearing, so there is nothing one can do about that, but most cases do not go to court and are settled by negotiation once any papers are issued.
Provided the debt is undisputed, then, as an alternative to a debt claim you could consider the threat of insolvency. If the debtor is a company, the debt just needs to be at least £750 and you can serve a statutory demand. So, the threat of insolvency proceedings can be very effective.
For an individual, the debt needs to be at least £5,000.
For most companies having a good set of terms and conditions or a contract that clearly sets out payment terms and clear sequential steps of dispute resolution (always set out to try and solve it between yourselves first) and a good chasing process precludes debt recovery issues.
New Pre Action Protocol (PAP)
Civil justice in England and Wales is well known for having prescribed overtures to the litigation procedure. These are termed Pre-Action Protocols (PAPs). The word "protocol" suggests a rigidity, which falls slightly short of the Civil Procedure Rules themselves, and terminology does indeed imitate reality.
Sanctions for not following a protocol have not been as draconian, or as
rigidly enforced, as the rules themselves, but the courts do expect compliance where possible.
For years now, there have been formal PAPs for numerous differing areas of legal dispute, such as clinical negligence, housing disrepair, construction, injury and industrial disease. Until now, however, there has not been a PAP for debt.
The first PAP for debt work comes into effect from the 1 October 2017. From that point on, the courts will expect you to have followed the protocol in any “business” dispute over a debt.
The qualification is due to the fact that not all business disputes are covered. The debt PAP applies to the following disputes only:
Business to consumer
Business to Sole Trader
It does not apply to business-to-business debt (other than above), nor does it apply to consumer-to-business disputes.
It is easy to see that the intention here, in addition to introducing a formalisation of the pre-litigation process with a view to reducing the pressure on the courts, is to retain an equality of arms between the parties.
There are several elements which must be included in your LBA to the debtor before proceedings are started. The LBA should contain the date and your return address, together with the following information:
The new PAP sets out that you MUST send the following:
1. Information Sheet
2. Reply Form
3. Financial Statement form.
The new PAP MUST be sent by post, but can also be sent by email or fax if you have other contact details, but it MUST, however, be sent by post.
The debtor has 30 days to reply. If the debtor does not reply to the LBA within 30 days of the date of the letter, the creditor may start court proceedings, although note the wording; "If debtor doesn't reply” NOT "if a reply is not received". It's therefore advisable to wait until a few days after the 30 day period expires, in case the debtor's reply is posted late.
The debtor is required by the PAP to:
If the debtor replies, the creditor should not start court proceedings less than 30 days from receipt of the completed Reply Form, or 30 days from the creditor providing any documents requested by the debtor, whichever is the later.
The creditor should be prepared to allow the debtor more time if there is
evidence that the debtor is actively engaged in the PAP process, or seeking debt advice, or seeking time to pay.
If the creditor does not agree to a debtor's proposal for repayment of the debt, they should give the debtor reasons in writing.
A partially completed Reply Form should be taken by the creditor as an attempt by the debtor to engage. The creditor should attempt to contact the debtor to discuss the Reply Form and obtain any further information needed to understand the debtor's position.
Early disclosure of documents and information is encouraged, and the protocol requires the parties to provide full disclosure, sufficient to enable them to understand each other's position. Any documents requested should be provided within 30 days of the request.
Unfortunately, the completed Protocol provides no option for a reply not using the Reply Form. The answer to this anomaly, I believe, can be found in the court's approach to compliance with other Pre-Action Protocols, and that approach requires compliance with "the spirit" of the protocol.
S2 of the PAP covers the aims of the protocol, which are to encourage
engagement and promote early settlement, thereby avoiding litigation. Therefore, if the defendant replies by means other than the Reply Form, the court will probably expect the creditor to give them
the benefit of the doubt, and continue trying to service the aims of the protocol.
If the parties cannot reach an agreement, they are required to consider Alternative Dispute Resolution, which can include mediation, although this is no more than a mirror of the compulsory requirement encompassed in the Allocation of Cases to the small claims track.
If a matter proceeds to litigation, the court will expect the parties to
have complied with this Protocol. The court will take into account non-compliance when giving directions for the management of proceedings. The court will consider whether all parties have complied
in substance with the terms of the Protocol, although it is unlikely to be concerned with minor or technical infringements, especially when the matter is urgent.
For further information about the court's approach to compliance, see the Practice Direction - Pre-Action Conduct and Protocols (paragraphs 13 to 16).
Since the 2013 changes to Court procedure, encompassed in the Legal Aid, Sentencing and Punishment of Offenders Act (2012), the Courts have been much harsher on, and much less tolerant of, non-compliance with the rules. This extension of the Pre-Action Protocol regime to debt claims means that while you may not before have been penalised for failing to follow accepted procedure (albeit informal), you will now.
It is therefore crucial that, in the event of a dispute, you ensure that you follow the Protocol as closely as you follow Court Orders and the rules themselves. As if you fail to do so, even if you win your case, your victory could be soured by costs or other penalties being imposed on you.
This article was first published by Dean Talbot, Director of Small Claim Assistance
The Government has published their proposals to require large companies to publish their performance when it comes to late payment. This comes after repeated surveys show that UK business is still dragging it's feet when it comes to paying invoices on time - one recent survey showed that 39% of all invoices issued in the UK are paid outside of terms.
Late Payment is more than just an irritation - it can cause real problems for many smaller businesses who rely on prompt payment and a regular cycle of cash flow to be able to pay their own bills. As a result, the Government announced back in 2014 that it would set up a public register to "name and shame" late payers. Over two years later, it looks like this is finally about to become a reality.
In short, the Government is requiring businesses to publish information about their payment practices. These will be publicly available on a website, allowing anyone to see at a glance whether a particular company pays their invoices on time or not.
The first thing to note is that the reporting requirements only cover medium and large businesses. This is defined as any company that meets at least two of the following criteria:
Those accountants among you may have noticed these criteria are the same as those used in the Companies Act to define a medium sized company, and it is expected they will change in step with any changes to the definitions in the Companies Act.
For a full version of this arrticleeicle
Once a company falls into this category then from the second financial year on wards (so the following year in which they exceed the thresholds so giving one years' grace) the company must report twice a year on the following information:
Still not much detail at the moment on how this will be reported and the Government have stated that there will be a webpage on the existing www.gov.uk site where this information will be shown.
What is clear is the frequency of reporting. Every qualifying company will have to provide the reporting information twice a year, within 30 days of the end of either the first half or the second half of the company financial year for payments made in that six month period.
It is good that action is being taken to tackle the culture of late payment within the United Kingdom and we applaud the Government initiative as a long-overdue start to the process of increasing transparency on this issue.
Of course the actual delivery of the reporting is crucial to ensure that creative reporting does not hide the statistic that percentage of invoices paid cover up the length of time it has taken to pay – which is where the real problem lies.
A simple resolution is to give the Small Business Commissioner the power to investigate complaints about inaccurate reporting and teeth to insist those qualifying companies set out reporting formats in a clear concise manner.
These rules only apply to medium and large businesses which only covers 2% of businesses in the UK, but the long journey towards on time payment starts with one small step.
The issue remains that whatever governments do they are always some way behind what is needed by SME’s and businesses trying to get paid and stopping late payment having a serious effect on the bottom line. That is why when faced with a late payer AVC Debt Re4covery are ideally placed via their ‘no win no fee’ proposition to get your monies and this remains your best option.
While government talks we deliver debt recovery for business, notwithstanding that any Government action against late payment is welcomed.
A claim for recovery of a duplicate payment of an invoice, would be a restitutionary claim rather than a contractual one. A claim for interest would not therefore, be made under the contract between the customer and supplier or under the Late Payment provisions.
However, where a duplicate payment has been made, you may be able to claim compound interest under the House of Lords' ruling in Sempra Metals Ltd v HM Commissioners of Inland Revenue and another  UKHL 34.
Harassment is a course of conduct which amounts to harassment of another and which the defendant knows or ought to know amounts to harassment.
What constitutes harassment depends on the facts; where a creditor is professional in his approach to credit control (i.e. by calling a debtor in a professional and non-threatening manner at reasonable intervals after an invoice becomes due), this is unlikely to amount to harassment.
Needless to say, if a creditor were to call a debtor regularly in an aggressive and threatening fashion or where, for example, a creditor called the debtor at unreasonable times of the day, requesting payment over the phone could indeed amount to harassment.
The rules on what constitutes harassment when collecting debts are quite clear. Calling a debtor is an important part of any credit control process. The key is to approach these calls in a professional fashion.
A limited company has its own legal personality independent from its directors. If Company A is liquidated and Company B starts trading, Company A and Company B still have separate legal personalities, even where the directors of both are the same people.
Therefore, a creditor of Company A cannot pursue Company B for Company A’s debts, simply because the directors of Company A and B are the same.
Where a director of Company A has given a personal guarantee to the creditor, or in extremely limited other circumstances, a creditor may be able pursue the directors of Company A personally. However, in the absence of a personal guarantee, this will be an exceptional remedy rather than the norm.
This scenario, which is not uncommon in practice, highlights the need for a creditor to closely monitor the credit being afforded to limited companies and the benefits of obtaining a personal guarantee from a customer’s director, where the customer is a limited company.
Some businesses may be able to undertake credit checks on a sole trader or director using a credit reference agency. If a business does not have access to such a facility, a business can check whether a sole trader or director is a home owner via a Land Registry search.
Statutory Demands: Quick Recovery
A relatively quick and inexpensive way of recovering cash from a slow paying limited company is the use of the statutory demand for payment. Many creditors prefer this to taking court action which is perceived as being both slow and costly.
What is a statutory demand?
The starting point is the Insolvency Act 1986. In terms of Section 122 of the legislation a company may be wound up if it is unable to pay its debts. The definition of “inability to pay debts” is contained in section 123 (1)(a) of the Act. This states that “a company is deemed unable to pay its debts if a creditor to whom the company is indebted in a sum exceeding £750.00 has served on the company, by way of leaving it at the company’s registered office, a written demand (in the prescribed form) requiring the company to pay the sum due and the company has for three weeks thereafter neglected to pay the sum …”
What happens if the debtor disputes the Demand?
Failure to respond to the Demand can have draconian consequences leading to the creditor petitioning to have the debtor company wound up. Accordingly the Demand does give the debtor company the option to dispute the debt by completing an appropriate section detailing why the sums claimed are not due. This should be returned by the debtor to the creditor or creditor’s solicitor that prepared it.
What sometimes happens is that the debtor company details a dispute which the creditor states is not genuine. In those circumstances can the creditor simply go ahead and petition for liquidation? There have been a number of cases which have focussed of whether this is possible. The issue debated before the Court is whether or not the dispute is genuine. If it is then it is highly unlikely that the Court will allow the Petition to proceed. Often the matter is aired before the Court with affidavit evidence being led as to the nature of the dispute.
In those circumstances it is probably better to abandon the liquidation petition and to proceed with a court action in the knowledge that it is likely to be defended. It is submitted that this should not be seen as a failure. After all what does the creditor want to achieve by serving a Demand? The answer of course is to get paid by the debtor company. If that company simply ignores the Demand and is prepared to take the consequences of going into liquidation then it is unlikely that the creditor will achieve little more than a few pence in the pound by way of a dividend payment.
However, if there is a genuine dispute then the Demand process really should not have been used in the first place and it is entirely reasonable to expect the debtor company to respond by denying that the sums due under it are due.
Of course the creditor may say that the dispute is not genuine. However, this really has to be up to the Court to decide. In any event the “enemy” of a successful recovery is not necessarily denying the debt is due. The real danger is being ignored. A debtor company that reacts to the Demand by submitting a denial cares about being wound up and it may well be that the company will have assets to satisfy the creditor after court action has been raised which could well settle shortly after it has been raised.
Originally published by Stephen Cowan, Managing Partner, Yuill + Kyle
Debt recovery + Credit control Lawyers, Scotland
AVC Debt Recovery :Debt Recovery for Business : Tel 0333 121 0161
Debt Management: What Are Your Options?
An issue faced by many companies is the time and cost of chasing down money owed. This can be an onerous burden. However, there are steps you can take to ease the process
For many businesses, dealing with late or non-paying customers is part of doing business and for some trades and businesses it may need to be factored in. For businesses starting out, expanding or growing quickly the late payers and non-payment allied to the time and effort required to chase payments can be extremely frustrating and costly to the point of a dangerous risk to your solvency.
What are the warning signs?
To tackle the problem of bad debt, all businesses need to stay alert and spot signs that an invoice issued to a customer could be becoming a problem. If a customer normally pays its invoices on time after 30, 60 or 90 days but payments suddenly start to slip and excuses suddenly start or you can never get hold of the accounts team this could be a sign that they are experiencing cash-flow difficulties.
Another indicator could be if a customer suddenly starts requesting a breakdown of the invoice or a purchase order number after the invoice payment has become due to you. While such requests may of course be entirely justified they could also be symptomatic of the company suffering issues and using stalling tactics because they are experiencing financial problems; or.
you suddenly start getting queries about the payment terms in your terms and conditions.
All businesses should check the credentials and credit worthiness of customers at the outset and monitor the relationship as it develops, but very often the euphoria of the sale overtakes pragmatism and the thought of losing the sale eclipses the right approach.
When dealing with big companies you should also keep a close eye on media reports as these could provide advance notice that a customer is heading for business failure.
If you have salespeople who communicate with people in offices they can usually tell you what is going on, with the first tell tackle sign of cash flow issues is when workers remark that office supplies start getting tight.
Forewarned is forearmed is the best policy. Always try to give your business time to mitigate any financial risks.
Most businesses with shorter trading histories tend to lack the skills and resources to handle debt management issues in house as their success is built on selling and that is what drives most business. It is a rare salesperson that wants to turn away a sale because of worries about payment.
There is also a fallacy amongst many companies that engaging debt recovery or seeking help in collecting revenues is expensive and an admission of failure and unless 100% can be recovered it is not effective.
Debt recovery offers a return on something. We say that 85% of something is better than 100% of nothing and 100% of nothing will be the return if no action is taken. The law also sets out that statutory charges for each invoice and debt recovery fees can be added on so the law is on your side in debt recovery.
As well as helping to recover monies more quickly and prevent late payers turning into a bad debt, early intervention can help to prevent the situation from spiralling into a costlier legal dispute.
Who can you turn to?
When selecting any debt recovery company to provide services, businesses should make sure it has the understanding of any agreements and the contract you have as well as the ways you wish to do business.
Do they have the flexibility to sort the matter?
The ideal is to get paid quickly and retain the customer.
It may well be that a debt is not recoverable, so make sure your debt recovery agency understand contract law and have the expertise to sort out terms and conditions and contract issues that may have arisen.
Make sure that any debt recovery agency puts prevention rather than cure at the top of their list, and can add value to your business proposition.
How to deal with high profile clients
When dealing with key customers, small and medium-sized businesses can be understandably reluctant to put pressure on them to make payments in a timely fashion.
If your terms and conditions say 30 days it means 30 days and is not a target to perhaps aim for.
Some large companies pay based upon their size and power. We were made aware that a large multinational had accountants who purposely did not pay suppliers until 30-60 days beyond agreed terms and boasted that no supplier would dare invoke late payment legislation and add charges under Late Payment Legislation for fear of being delisted..
There may be a perception that the trading relationship is a valuable one, when in fact hidden financial costs or repeated late payments are eroding any profit. In some instances larger companies may put pressure on their supplier(s) to accept longer payment terms or demand discounts. Such behaviour could be a sign that the customer is struggling financially and may have been refused credit elsewhere.
In order to prevent bad debt issues escalating, businesses should make sure they have efficient cash collection systems in place. It does not have to be complicated, simple software will tell you when monies are due. If the customer has signed up to 30-day payment terms, you should ensure you ring them promptly if this date has passed. Apply the same effort to cash collection that you do to sales.
Would any good salesperson not follow up, so why not apply this to being paid?
After 45 days, the business should be sending final demands to the customer quoting Late Payment Legislation and adding the Statutory Charge under law.
If no payment is made by 60 days, then immediate recourse to debt recovery should be sought. Making it clear (preferably in your terms and conditions) that the business has a strict policy in place to tackle late payment of undisputed invoices and will apply The Late Payment of Commercial Debts (Interest) Act 1998 can help to lessen the risk of bad debt arising and staying in touch with late payers can sometimes shed light on the extent of the customer’s financial difficulties.
Going to court
We always say that going to court is the last resort, but issuing a claim via the court often spurs late payers into action and the fees can be added to the debt.
In most cases, for claims of less than £10,000, it is possible to make use of the small claims track court system.
The system is simple and most debt recovery companies will walk you through the process, but being realistic about what you can claim is always the best policy.
A realistic business debt that is recoverable for a debt recovery company ids £600.00 plus.
It is no good winning in court if there are no assets, but a good debt recovery company will look at all matters.
Whether you are a start up, a fast growing or a fully established business, it is important to establish the right policies and procedures from the start and this should help to manage and stop any late payer turning into a bad debt.
Here at AVC debt Recovery we offer a full range of services from an initial no obligation conversation right up to recovery in the High Court.
Debt Recovery of Invoices
Many companies do not realise that they are entitled to chase invoices they have issued that go back 6 years.
Debts like these are covered by the Limitation Act 1980. This statute of limitations sets out the time scales as to how long a creditor can chase the debtor for an unpaid debt.
It is important to remember the specific start point of the time limit, which is set out as starting 6 years from when the person or business last acknowledged owing the debt or made a payment on account against the invoice, not from when the invoice became due.
However, before you start trailing back through your books and invoice ledgers and doing a Light Brigade charge to see who hasn’t paid you need to pay notice to the following:
1.The Act only applies if you have maintained regular contact with the client regarding this debt, for example you have sent them a monthly / quarterly statement of account (it might be argued that an intermittent letter yearly might be acceptable).
2.If you have failed to maintain contact then the debtor (your client) may be able to claim that the outstanding debt is statute barred under the Limitation Act 1980.
3.If it is barred then it would mean you are unable touse the legal system to enforce paymentfor the outstanding amount you invoiced.
4.However, even if your debt is not statute barred, make sure you have all the required information before you enact the communication of the chasing process. If you provided goods and/or services then the first thing your customer will request is proof of delivery notes, acceptance notes etc and their purchase order confirmation if you were working to a PO. There is no point chasing the invoice if you cannot prove the goods were delivered or ordered under a correctly issued contract (an email is a contract).
5.Is theinvoice in dispute? Again check your records to see if you were at any time made aware that the invoice was in dispute. (if you had an admin assistant that was not very efficient who you let go the chances are the dispute may be filed under couldn’t be bothered). If your client has proof that they made you aware of a genuine dispute then this would also bar the Limitation Act as set out above.
6.When chasing any lapsed unpaid invoice allow the company reasonable time to look into the matter, but if they have not been paying for a long period the chances are they will think it will go away again, so set reasonable deadlines and stick to your follow up deadlines. You cannot expect a response within 24 hours, but a response of we’ll get back to you without a timeframe is totally unacceptable. Many companies archive their records every 12 months so if an unpaid invoice payment is 6 years old they will need to dig out all the information. There could have also been in changes to personnel – therefore the person you dealt with or who ordered the goods or services may no longer be working with the company.
As time goes on it gets harder and harder to collect monies as the moment the matter is brought up it will be unpaid because of a dispute, even though none was raised at any point. In theory no company should have invoices outstanding more than 14 days past their terms let alone 6 years. Collecting monies on time will a positive effect on your cash flow and a cash positive company is a happy company. Credit control is a skill and for most businesses can be a very time consuming role; therefore it might pay you to outsource this service to a specialist company as these charges can be less than the cost of hiring an employee.
When credit control is not the answer AVC Debt Recovery’s mantra is ‘do not risk allowing a bad payer become a bad debt’ and seek professional debt recovery analysis and input.
AVC Debt Recovery
Debt Recovery for Business
More Top Tips on Avoiding Bad Debts
Following on from our 8 tips on reducing your risk to bad debt here are our top 8 tips on being assertive with late payers.
Cash is the lifeblood of all businesses.
To paraphrase Oscar Wilde
“When I was first in business I thought that money was the most important thing in business; now that I am older in business I know that it is.”
“Money is like a sixth sense – and you can’t make use of the other five without it.” – William Somerset Maugham
“Always borrow money from a pessimist, he doesn’t expect to be paid back.”
Of course you are in business so you are not a pessimist and expect to be paid for agreements made and works enacted.
You can run a business without profit, but you cannot run it without cash (money).
It is no use having a full order book and great clients offering you more work if they do not pay and preclude you from keeping your cash flow positive.
It is no use to you having other people’s money sitting in their account after you have provided goods and /or services, and it is not useful for you and your business if you have to spend your valuable time chasing your customers for the cash that you are entitled to. Although no one thing can guarantee success, our experience has shown that following basic steps can improve your cash-flow, reduce your debtor days and minimise the likelihood of bad debt.
1/ Make sure your customers know you expect and want to be paid on time. Set that out in your Ts & Cs. Fail to do this and you potentially invite slow payers. If you went into a restaurant and stated you were not going to pay for your meal for 90 days would you get served?
Do you have a new supplier form that sets out the people who receive and deal with your invoices?
Do you have a process that checks your invoices have arrived on time? Keep the credit control function properly resourced (even if it is just you doing it on a set time and date each week) and align the processes with the people, but have processes that set out contacts and follow up procedures to send out statements and the chasing up of slow payers by email and telephone.
Don’t write letters (unless you attach them to an email) as it just slows down the process and adds cost.
2/ Tell all customers in your Ts & Cs that as part of good and healthy relationship, that all overdue payments will be collected as a debt and action will be taken against slow and non-payers. We sometime seem to worry about asking for monies we are entitled to. It’s not personal but it might become personal when the amount owing starts to put your business under pressure. Being assertive does not make anybody an ogre, but being passive about what is agreed most certainly makes you seem weak, foolish and foolhardy. Make sure part of any sales training includes asking for money and the new supplier payment process.
3/ Set out clearly the cost to the debtor if you go legal in your Ts & Cs. Set out the Late Payment of Commercial Debts (Interest) Act 1998 2013 Regulations. Quote interest, late payment statutory charges and administration charges when you telephone to chase. The law is there for a reason: to ensure cash keeps flowing to those it is due to. Use these costs as a negotiating tool, as you are a nice guy. You don’t want to use the law. Always ask yourself: how relieved are you when you are caught speeding and the police officer states he is not issuing a ticket, but gives you a telling off instead. Explain the reluctance to escalate a £600.00 invoice into £1,000 if they become a debtor under the Late Payment legislation.
4/ Even if you go legal; the process can be stopped any time up to the court and if it does and you win and get a Judgment entered it’s not too late for the debtor to pay and avoid a Judgement following them around for 6 years. A CCJ is not a badge of honour in business and will preclude them credit further down the line. Remind your debtor that if they pay the Judgment amount in full within one month then they can apply to have the Judgment removed from the public register. But if they don’t pay within a month then the Judgment will remain on the public record for six years, even if they subsequently pay up in full. Remind them that the Sheriffs (Can’t Pay We’ll Take it Away; on TV) are unforgiving.
5/ Here at AVC Debt Recovery we use the power of a draft Statutory Demand or winding up order for non disputed debts over £750 against companies (although they often become disputed once the SD is issued), not just a letter. For individuals the amount is £5,000.
6/ Always make a call before issuing any proceedings of any kind (then make judgement call) whether you wish to proceed. Make a call before you issue any claim or instruct a debt recovery company to remind them they agreed to your Ts & Cs and that if they do not pay then costs will increase. Remind your debtor that this is their last chance to avoid legal proceedings. Don’t be frightened to use the telephone to issue more reminders to get those waverers who think you might be bluffing to seal the deal before court action.
7/ After any claim is issued ask your debt recovery agent to call and ask the debtor if they want to pay to avoid any Judgment, which will hit their credit rating and go on the public record. Many will take this opportunity. Be prepared to settle at a reasonable level if both parties can sit down. Make sure you instruct to keep all dialogue channels open and remain flexible. Remember 85% of something is better than 100% of nothing and at 85% you might still be making a profit.
8/ Ask your debt recovery agent to ratchet up the demands using both a Letter Before Action (LBA) and a Late Payment Demand (LPD).
We hope you can take something from these tips, but whatever you do check your own Ts &Cs and ensure you are telling people what is acceptable. Here at AVC Debt Recovery we always use the Amazon example. Even though you have already paid the one last thing you must do before they will sell you any product is tick the Ts &Cs acceptance box.
1 Choosing the wrong ownership structure
Company structure is probably the most important decision when starting a business. The decision you make has significant implications on your personal legal liability, your tax liability and benefits, your ability to accept investors and how easy it will be to sell your company. Why this is a problem: If you select the wrong ownership structure, you expose yourself to the following risks: unlimited personal liability for your company’s debts and the ability to earn in a tax efficient manner. The wrong structure makes obtaining investors much harder and more expensive to achieve. Our advice: You should always create your ownership structure before you enter into any agreements or contracts. When setting up a business, especially with family or friends, it is easy to assume that nothing will go wrong in the future. You assume that as you trust one another you do not need to put in place things like shareholders’ or directors’ or partnership agreements. Whilst they sometimes consult their own advisers, it’s up to you to make sure that your investment documents comply with the law. If you don’t, and things go wrong, you expose your business and possibly yourself to liability. Why this is a problem: Hopefully nothing will go wrong in the future but even family members and best friends fall out. If the worst should happen you could then end up with nothing and you might face the breakdown of a friendship alongside a costly and acrimonious legal dispute. If an investor puts money into your business and loses money, they’ll often ask their lawyers to investigate whether appropriate disclosures were given. If they were not, investors may sue – and seek damages. Our advice: Securities laws are complicated so it’s important that you always consult a lawyer when d
2 Not having formal agreements Company structure is probably the most important decision when starting a business. The decision you make has significant implications on your personal legal liability, your tax liability and benefits, your ability to accept investors and how easy it will be to sell your company. Why this is a problem: If you select the wrong ownership structure, you expose yourself to the following risks: unlimited personal liability for your company’s debts and the ability to earn in a tax efficient manner. The wrong structure makes obtaining investors much harder and more expensive to achieve. Our advice: You should always create your ownership structure before you enter into any agreements or contracts. When setting up a business, especially with family or friends, it is easy to assume that nothing will go wrong in the future. You assume that as you trust one another you do not need to put in place things like shareholders’ or directors’ or partnership agreements. Whilst they sometimes consult their own advisers, it’s up to you to make sure that your investment documents comply with the law. If you don’t, and things go wrong, you expose your business and possibly yourself to liability. Why this is a problem: Hopefully nothing will go wrong in the future but even family members and best friends fall out. If the worst should happen you could then end up with nothing and you might face the breakdown of a friendship alongside a costly and acrimonious legal dispute. If an investor puts money into your business and loses money, they’ll often ask their lawyers to investigate whether appropriate disclosures were given. If they were not, investors may sue – and seek damages. Our advice: Securities laws are complicated so it’s important that you always consult a lawyer when dealing with investors.
3 Inadequate Organisational Documents
It’s not enough to decide on the right ownership structure for your business. If you decide on a structure that requires documentation – such as a corporation – you must follow the formalities laid down by law and create and maintain certain records. Why this is a problem: If you fail to follow corporate formalities, you expose yourself to personal risk. A court might find you personally liable if they believe that the corporation wasn’t properly established or maintained. Our advice: Make sure that you put in place proper governance and establish and maintain robust organisational controls.
4 Inadequate Corporate Documents
More often than not founders of startups and small businesses know very little about keeping good records (including corporate, tax, employment, human resources, health and safety and so on). Why this is a problem: If your business documentation is not in order, you may face personal liability for the debts of the business. You also create problems for any acquisition because anyone conducting due diligence on your assets and liabilities will have difficulty understanding whether you have properly protected your rights. Our advice: You should consult with a lawyer to ensure that you have the appropriate legal documents required for the type of business you are running.
5 Weak Client Agreements
This is a common mistake among many small businesses who often believe that a handshake is sufficient. It is not! Why this is a problem: It is very difficult to uphold a verbal agreement in court. A properly written agreement on the other hand can protect your interests and rights. It will also typically save you a lot of aggravation and the legal expense of having to enforce your rights. We can’t blame small business owners wanting to save money – we all do! But what is the best-fit for another business’ isn’t always the best fit for your business in terms of legal needs. Our advice: Saving money by using standard form agreements from other companies is not a good idea as it will not necessarily be current in law or fit your own business model and processes.
6 Weak Internal Agreements
Many startups and small businesses fail to create appropriate employment, non-compete and/or share options agreements for their employees, contractors and directors. This is a huge mistake and can only result in trouble in the future. Why this is a problem: If you don’t protect your rights with an appropriate employment agreement, there is a risk that former employees could set up in business against you using your intellectual property. Our advice: Eliminate the potential for disputes by making sure your employees’ and your company’s respective rights and responsibilities are clearly defined in writing.
Protection Don’t take unnecessary risks when it comes to legal matters
7 Ignoring Intellectual Property
Many small businesses – especially non-tech small businesses, believe that they don’t have any intellectual property risk. On the contrary we represent many clients in non-tech industries in numerous patent, trademark and copyright disputes dealing with mundane non-tech products and services. Why this is a problem: If you ignore intellectual property, you fail to protect your rights and may not properly acquire ownership to intellectual property that could be critical to the future success of your business. For example, if your employees invent new technologies or processes in your business your employment agreements should clearly specify that they assign those rights to your business. Our advice: If you’re licensing your trademark or software to another company, you need to make sure that you’re not giving away your intellectual property.
8 Doing Business Online
9 Debt and Litigation
Litigation is expensive. Very expensive. Typically, the only people who profit from litigation are the lawyers. Why this is a problem: Cash flow is king. If your customers don’t pay you on time or try to avoid paying, your business could fail. Calling and asking for payment time after time must be dealt with quickly. Litigation is a weapon of last resort that must be balanced with the debt and its cost of recovery Our advice: Include consequences for late payment and dispute resolution clauses in your contracts and enforce them promptly as part of your business processes.
10 Taking risks with Health & Safety
By law, all businesses need to assess potential risks in the workplace. Health and safety fines can be hefty and can cripple your business. Only firms with fewer than five people are among those not required to come up with a written statement. Why this is a problem: If you fall foul of health and safety law you could face a fine or worse be sued for damages in respect of accidents at work. Businesses with over five members/employees need to provide certain statements which address matters such as what to do in the event of a fire and the procedure for reporting and dealing with accidents. Our advice: Ensure you have the necessary written statements for health and safety matters and don’t wait for an incident to happen.
What’s in a Footballers Contract
CW Contract Law and Legal Simplify the in’s and outs of a Footballer’s Contract
It’s that time of year when rumours of players on the move from one club to another abound. Come the end of the Premier League season we’ll see swathes of football fans turn to the infamous rumour mill to get their fix of football. Exorbitant numbers and ludicrous weekly wages will be splashed across the back pages on a regular basis throughout the summer but in 2015 we still know very little about what goes into a football player’s contract.
Famously Robbie Fowler never looked at his Liverpool contract while Paul Gascgoine’s reportedly included a clause that demanded his accommodation be close to a fishing lake. Stefan Schwarz’s contract banned him from space-travel.
Regardless of the crazy clauses and ludicrous demands, Footballers’ contracts are often incredibly lucrative but usually incredibly complex.
“When I was playing, a contract was probably three, four, five pages long…nowadays they contracts are more like a John Grisham novel” Mark Lawrenson
But what exactly is in the mysterious pages of a professional football contract? We opened the door to a secret world inhabited by only those lucky enough to play the game professionally and wade through the ‘legalese’ to show you what goes on behind the closed boardroom doors of professional football.
The area of interest for the vast majority of football fans is the salaries of Premier League and Football League players but the reality is they are quite straightforward.
"A contract will include a basic salary, signing-on fees, loyalty fees, objectives based on games, sub-agreements for image rights and any clauses you may wish to negotiate." Matthew Buck – PFA
According to the PFA top earners in the Premier League (Wayne Rooney, Radamel Falcao) can earn upwards of £250,000 but the average player in the top flight will take home between £25,000 and £30,000 a week.
That represents a weekly income akin to the average yearly income in the United Kingdom.
The drop to League Two wages is remarkable but even players in football’s fourth division average a weekly wage between £1,300 and £1,500. That can vary wildly and some players make below the minimum wage (as revealed earlier this season by Torquay United manager Chris Hargreaves.
Financial Fair Play regulations introduced by UEFA have caused Clubs to focus on performance related earnings to drive down their wage bills and avoid any penalties.
It’s widely understood that players make a vast chunk of their change through bonus system built into the majority of players’ contracts. A short appearance from the bench could earn a player as much as £5,000 while goals, assists and clean sheets all come with a tariff.
In some contracts in the MLS players are remunerated for second assists, otherwise known as the pass that led to the pass to the player that scored.
Squads will split a bonus pot based on league positions and achievement in cup competitions and very often senior players at a club will hand their lucrative league bonuses to the junior players at a club as a gesture of goodwill.
Those bonuses can sometimes affect a player’s behaviour.
"I know some players who have come in on high goal bonuses and it's no surprise when they are shooting from all over the place." Preston Striker Kevin Davies
Apparently clubs are getting wise to this and have started to cut back on individual performance related bonuses; instead focussing on team achievements.
Sometimes contracts will contain unusual clauses. Upon joining Sunderland in 1999 Stefan Schwarz let slip that he would be interested in travelling into space one day so the club swiftly slapped a galactic travel clause into his contract.
Crystal Palace played host the twilight of Neil ‘Razor’ Ruddock’s career and then-chairman Simon Jordan reportedly included a clause in the aging midfielder’s contract that ensured his earnings would reduce if he was found to be overweight.
Occasionally it’s not the unusual clauses that provoke bizarre behaviour but the more routine. Buy-out clauses have been widely reported recently especially in the summer of 2013 when Arsenal bid £40m and one pound to trigger the release clause in Luis Suarez’ contract. The Uruguayan never made the trip to London permanent but the story became big news overnight.
"The biggest contractual issue comes when a perceived bigger club comes in for a player, or a player is aware of the interest via an agent or the media.
Players want to better themselves but the PFA encourages players to always honour their contracts because we expect clubs to do the same."
PFA regulations are clear in the matter that if Player’s do break widely accepted rules with regards to behaviour they can only be fined a maximum of two weeks’ wages by their club. While that can seem like a paltry figure, Carlos Tevez’ tantrum in Munich cost him around £400,000.
Usually it’s much more cordial and, should a player desire to leave, he’ll waive his basic salary but would continue to be paid signing-on or loyalty fees as per his contract.
Luckily for the vast majority of people in business, a contract or agreement is a much simpler matter than that of a footballer’s. CW Contract Law and Legal understand that and are committed to ensuring all your paperwork, contracts and legal documents are spelt out in language you understand.
To get in touch visit us at cwcontractlawandlegal.co.uk or call us on 0161 333 121 for a no charge no obligation discussion about how we can add value to your business proposition through a legally compliant affordable concise contract.
Handling a Dispute: Business Briefing
Does the business really want to be involved in legal
Is it possible to negotiate a settlement?
Practical steps to take when a dispute or potential claim arises.
Handling a dispute: Business Briefing
This Business Briefing sets out the actions a business should take when a dispute or potential dispute arises. It applies to any dispute or incident, whether started by the business or brought against it (for example, a dispute with a trading partner or a prosecution by a regulatory body).
Does the business really want to be involved in legal proceedings?
It is very important to understand what the business is getting involved in. It is almost always better to find a commercial solution to a dispute. Consider:
Is it possible to negotiate a settlement?
Practical steps to take when a dispute or potential claim arises
a.knows which time limits apply; and
b.has enough time to comply with them.
Do not destroy, delete or amend any relevant documentation
Be careful when discussing a potential dispute or preparing a report on an incident
Businesses may have to show embarrassing or damaging documents to the other party or the investigating body as part of legal proceedings. Therefore:
A business may have to implement improvements or changes in practices following an incident, implicitly showing that previous practice was flawed. Take legal advice to find the best way to do this without prejudicing any possible litigation.
• Privilege and confidentiality can be lost if the privileged or confidential information is distributed or copied too widely. Only circulate it on a real “need to know” basis and never copy it externally without taking legal advice beforehand.
Is the business insured?
Check the business’ insurance policy to see if it is an insured claim. If it may be, notify the insurers immediately and follow their claims procedure, otherwise the insurance claim could be invalidated. The business may need to get the insurance company’s consent before taking any action.
Establishing the case
LATE PAYMENTS AND BUSINESS: THE FACTS
There are 4.8m small businesses in the UK and the number is growing as is the propensity for late payments.
Here are some facts provided by Sage.
1 in 3 small businesses are owed more than £30,000 in outstanding invoices
4 Hours plus.
1 in 5 businesses are spending at least 4 hours a week chasing outstanding invoices.
60 Days plus.
2 in 3 small businesses say they have had to wait more than 60 days for an invoice to be paid.
90 Days plus.
Almost 50% say they have had to wait more than 90 days.
Here at AVC Debt recovery we never feel guilty about asking late payers for our client’s money and neither should you.
Many small businesses dream of getting the large accounts with big business, only to find that very often they are the worst offenders when it comes to late payments and the life blood of any business - cash- is being squeezed out of them.
We have spoken to a multinational accounts department who have openly stated that their policy is 90 days plus despite promises of 30,40,50, 60 days and the law being against them. Another serial late payer is the public sector, but more often than not that is caused by poor communication and the specifics and machinations of a convoluted payment process.
Top 10 Excuses for Late Payment
This one is still in circulation, but less so nowadays as bank transfer has now reached over 50% of all business payments
Simple way to overcome this is to create a facility to accept bank transfers and even accept card payments. If you have card payments you can accept payment on the spot and offer to cancel the cheque. Be creative: offer to deduct the £12.00 fee of stopping the cheque from the invoice and issue a credit there and then.
This one that should be ironed out at point of sale by always asking who pays you and how, as it will come up that perhaps the business may only have one or two people who are approved signatories. Ask to speak to that person, as if that person is that important they will not go anywhere without a mobile telephone and unless they are at the peak of Everest then there are not many places left in the world without a mobile signal. Use this as an opportunity to generate a more efficient alternative payment method or to upsell to the owner.
Another common excuse, this one essentially moves the cash flow impact from their business to yours. This is not an acceptable excuse and you must be clear that you have no contract with their customer and there is no flow down of liability. You are not responsible for their chasing procedures. This is the time to apply late payment interest charges under the 2013 Regulations as they are then able to flow these down without objections. The additional costs enabled by government legislation should be enough of an incentive to get them to pay.
Be ready for this one and have an invoice sitting there on screen when you dial the number and send it as an email attachment whilst you speak to a named person and get confirmation they have received it.. That way you can clarify there and then that the invoice is not disputed and you want immediate payment. If you use accounting software, you should have a record of when the invoice was sent and if it was delivered successfully, so you’ll be able to prove that it was sent. If not then the email is the record. Don’t get bogged down with whether it was received, use this opportunity to get a payment date.
OK, but insist that until that is done your contract is based upon what was agreed, just as the price does not change. However, online banking set up is now fast and efficient by all bank providers as they are all vying for business. It can be done in a few minutes.
Nobody can exist in a business without a bank account, so this excuse does not hold water. However, always turn the excuse intro an opportunity and get a payment time. Add on interest and tell them that the new bank will expect this if they are not delivering. The Current Account Switching Scheme, which was introduced in 2013, changed the time to switch accounts from 30 days to just 7 days. At the time 36 banks had signed up, so it’s unlikely that your customer will be without an account for more than a week. They should be able to pay as soon as the transfer is complete.
Again this is all part of the due diligence at point of sale. Often businesses only have a payment run once a month and more often than not rob Peter to pay Paul. If that is the case then ensure you are on the payment run for the following month. Get the date of the payment run and mark it in your diary to telephone 1 week before the payment rum to check that you are on there, then telephone again 3 days prior, as getting put on then bumped off is a common occurrence for monthly payment runs.
Then ensure that you get your invoices in 7 clear days before any payment run and perhaps follow up to see if you are on any payment run. Even companies who operate a strict one payment run have flexibility to make a one-off payment to clear the invoice. Ask to speak to the FD, MD or business owner as they will usually rather pay than discuss late payments.
Make sure that your payment terms are clearly stated in any contract or Ts & Cs. If you do not have any then make sure you get some and send them electronically with every sale. “Please find attached our terms and conditions,” and make sure your payment terms are clear and unambiguous. It is imperative that payment terms are discussed at point of sale and once sent then those terms apply, despite what anybody says. Reissue a copy of the invoice via email or a quotation which shows the terms and explain that you’ll apply Statutory Late Payment Charges and interest at 8% above base rate = 8.25% on any overdue amounts.
This usually only comes up when someone does not wish to make payment (why wait 30 days to complain about something you are not happy with?). We have even seen cases where testimonials have been applied on the quality of the service, yet later the quality of the deliverable is disputed. This needs addressing without prevarication. Ask for details about what was unacceptable and how this can be put right. Make an immediate flight or fight decision about whether they have genuine grounds for complaint and whether it’s feasible for you to rectify it. If you can, do it immediately and then reissue the invoice. If not, then negotiate a credit against works, but if you are of the opinion or do not believe they have a case, continue to pursue the whole outstanding amount. Always try to have dispute resolution in your contracts and terms and conditions so the process is clearly mapped out.
This is a surprisingly common excuse but the reality is that as most business are now so completely reliant on computer systems to do the most basic tasks, it’s unlikely to be down for long. Insist that payments are made as soon as possible or offer alternative methods, like taking the payment by phone.
All the tips in the world should not preclude common sense at point of sale, getting an agreement on the payment terms and a set of terms and conditions.
These tips will help you deal with the those customers who are forgetful and perhaps a bit disorganised, but those who have no intention of paying are a different kettle of fish.
It is imperative that those late payers who have the potential to become bad debts are dealt with and we always advise that when you feel that is beyond your ability to chase then instruction to debt recovery is sought, so you are at the front of the queue for any payments because if they are not paying you the chances are they are using your monies elsewhere.
Here at AVC Debt Recovery we look to act for our clients to get their monies into their accounts either no win no fee or via a fixed fee from the invoiced amount.
If you require a free debt recovery consultation pleas e visit our website www.avcdebtrecovery.com. We also check contract and draft terms and conditions.
Like many companies now stated to be owed £52bn-61bn in overdue payments you most likely get the odd debt cropping up every now and again? These may be from other businesses or even individuals. Many businesses often decide to just let these debts pass (we have seen passes up to £50k), thinking it's not worth the hassle to try to recover them. In contrast, other firms decide to try to recover every debt no matter how small (as a matter of principle) - after all nobody likes the feeling of being owed money after delivering services and/or goods to someone.
If you consider that our Letter before Action (LBA) letter is priced at just £6 inc vat then really no amount of money owed to you (debt) is too small to try to recover. We can also send an email and a text to your debtor too. As William Lowndes (1652-1724) famously said: “… Look after the pennies and the pounds will take care of themselves.”
Added to this our full range of services are no win no fee or fixed fee on collectable debts.
Visit us on www.avcdebtrecovery.com for access to our £6 LBA for any business debt over £600.
If you would like to see a sample LBA then please email firstname.lastname@example.org and we'll email you one over.
Perhaps you have the one large debt, but you are worried about your debtor's solvency, then please email Colin Ward on email@example.com or call our office number on 0333 121 0161 for complimentary consultation with a debt recovery expert. Remember, if you are chasing someone for money then others probably are as well so use our services to get yourself to the front of the queue to get your monies into your account.
As we always say: ‘Don’t let a late payer become a bad debt’ and ‘It’s not a great sale until the monies are in your account’.
Prior to the engagement of AVC Debt Recovery the Company that
owed me money would not communicate and stated they were not prepared to pay anything of a £20k debt to my company.
The help and persistence AVC not only brought a representative from their Company to have serious dialogue but they achieved a satisfactory settlement of the matter.
(Keith Askham - Java Facilities Limited)
AVC Debt Recovery
Debt Collection Advice For Freelancers
With 15% of the workforce in the UK now self-employed, it’s not just the big businesses that need help with credit control and debt recovery/ collection.
Chasing overdue monies before they become a debt can be difficult for any business – especially if you are self-employed and the role of credit controller falls into your lap.
How to be your own credit controller
Whether you employ an external bookkeeper to help or not, chasing late payers can be a difficult decision to make when you work for yourself. Switching from a sales and marketing mind set and relationship with your customers to one where you are pressing your lifeblood and contacts for money can be difficult at the best of times and not a transition many people like to make.
Whilst it may be uncomfortable to put on the debt recovery hat, it shouldn’t stop you from doing it. Prompt payment of your invoices is essential if you are to survive in your business.
Set clear payment terms up front
The key lies in setting the right terms down from the start as this can help you avoid cash flow problems, client relationship breakdowns, and awkward telephone calls in the future. We always say that onl;y focusing on the sale and forgetting to ask how and when you are going to get paid may be storing up issues at the outset.
If you work in the service industry, it’s may be prudent to ask for part payment or deposits up front to safeguard yourself against any payment problems down the line. Basic credit checks may also be wise. Sometimes asking for payment in advance for products is not an insult. As a small business, your prospective customers may push against any payment terms and try to negotiate with you, but always remember how much harder you may need to work to make up for goods or ser4vices sold and not paid for. Remain strong in your conviction and remember that a promise of business is only worth it if you get paid for your work on time.
Be clear about your payment terms when you establish new relationships and set those terms out clearly in quotes, contracts and terms and conditions. That way no ambiguities will exist and disputes will be reduced.
Don’t wait to chase for overdue invoices
If you do run into problems with late payers, you don’t need to go in hard straight away. Get on the phone and politely ask the person responsible when you can expect payment. Don’t leave the call without your client telling you what day they will be paying you and by which payment method.
If the problem escalates and you suspect your customer has financial problems, it is worth speaking to a professional debt recovery agency. The earlier you act against a later payer the less chance you have of that later payer becoming a bad debt. . Faster action improves your chances of being able to recover monies. Get yourself to the front of the queue and persistence often precludes the debtor using the cash elsewhere.
To find out more about our professional debt recovery and credit control model and claim your Free debt recovery consultation contact us at AVC Debt Recovery.
Your idea of a business debt collector?
Mention the words debt recovery or debt collection to most people and they immediately get a vision of a burly tattooed bloke with a crew cut, limited vocabulary and baseball bat. The reality is far removed from this.
While there may be unfortunate times when your business needs to employee the services of a bailiff or sheriff (who may or may not look like your mental picture because most of them are very polite), there’s a long process to go through before they can just turn up on your debtor’s doorstep to take away his belongings including car and computers. In fact the law is quite specific about what can and can’t be taken.
When you engage the services of a professional debt recovery business like AVC Debt Recovery using our “no win no fee or Fixed Fee deliverable, there is a process to follow, and this process happily gives your debtor many opportunities to change their mind and settle your unpaid invoice.
Attempts to Contact
The first thing to do with a debt is to contact the company that owes you money and find out if there’s a reason why they have not paid. Perhaps they claim that they didn’t receive your invoice, or perhaps your invoice was incorrect and is now sitting in the pending file. Perhaps there is a genuine error and in some cases people actually have not chased their invoices and a telephone call solves the issue. Perhaps there is a dispute that both parties have put to one side and forgot about. While sometimes there are genuine reasons perhaps they are just excuses to avoid paying, The best scenario in collecting monies is prompt credit control procedure that enable a quick and easy resolution.
However, if there is a late payment that is not easily resolved then action is required. If a company says that they are in financial difficulty or can’t pay you, then the next step is to see if you can agree a payment plan for the debt. Here, the debtor commits to pay the debt in instalments over an agreed length of time and in agreed instalments.
It’s important to at least attempt to reach a compromise with the debtor because if you do end up in court, judges will look more kindly on your side of the argument when they can see that you have tried to act in a constructive way to settle the dispute without taking up expensive court time.
Final Warning before Action
If you can’t agree a payment plan, or the debtor is unresponsive, then the last step before going to court is to issue a final demand. This communication will be sent by both email and by signature required mail.
Here you issue a deadline after which if the debtor has not paid in full you will state you will commence legal proceedings to recover your debt. Before issuing such a demand it is important that you are absolutely committed to following through. It's not good practice to issue threats and not act on them, and doing so could be interpreted as harassment.
County Court Judgement
If the debtor does not respond to your final demand or they do but you can’t agree a payment schedule, then you have no further options except to take them to court. The process of taking a debtor to court can last many months and winning is not an exact science, but if you have a case you will win and obtain judgement against the debtor..
Court Judgement-backed Payment Plan
Judges often manage outcomes by imposing a payment plan on your debtor, especially if they ask for one. This is not ideal, but with a judgement backed payment plan you’re in a much stronger position than a payment plan agreed between you and the debtor. If the debtor fails to pay you at the agreed time you can apply to the court for a warrant for bailiffs to seize property and goods to the value of your debt. It is only at this point as a complete last resort that the professionals we all have the perception of and see on the TV get involved. However, be aware that clever debtors can frustrate the system.
Why use a Debt Recovery/Collection Agency?
Of course it’s possible to do all of this yourself, but you are a professional at your business and what you do will be a more important and constructive use of your time. The big advantage of involving a professional debt recovery agency is that they can apply all facets of Late Payment legislation and communicate to the debtor to see if a constructive payment plan can be instigated prior to any court action. It also sends a clear message to the debtor that things have got serious and it’s time to pay up. If the debtor company is financially stressed, then they’re probably juggling who gets paid at the end of each month. By elevating your late invoice and involving a specialist in business debt recovery you get your monies to the front of the queue. It’s like being a celebrity at Wimbledon tennis. We make sure you are not queuing on Wimbledon Common, we get you to the front to get in (paid). We have the know-how to see the process right through to court (not the centre cout), but before that we have placed your invoice right up to the top of the list.
Many companies pay up very quickly once we contact them and we aim to collect all outstanding monies well before court proceedings are necessary. Sometimes a writ spurs the debtor into action to pay
You have a right to add a statutory charge, interest at 8% above the Bank of England base rate and recovery costs to a late payment from a business customer. This means that, if you choose to, we can add our fees to the debt , so the late payer pays our fees and our service ends up costing you nothing, or you can use a fixed fee service where we take a percentage of the debt, so you get 85% of your monies which, in 9 times out of 10, the client stays with you and becomes a more diligent payer.
For more information visit http://www.avcdebtrecovery.com
Benefits of credit control
"It Doesn't Count 'til it's in the Account"
For a small number of people paying on time is part of their ethos, but unfortunately for most their human nature is that they will not pay you until they are reminded to.
Many business people find asking customers for money a tricky and often uncomfortable conversation to have, but the longer the debt remains unpaid the more difficult it becomes to collect and the more at risk you are of a later payer becoming a bad debt..
With bad debt and cash flow issues cited as two of the main reasons most small businesses fail it is vital that someone in your business is tasked to keeping an eye on your outstanding monies and guarding your cash flow.
What is Credit Control?
Credit Control is the system used by a business to make certain that it gives credit only to customers who are able to pay, and that customers pay on time. It is a critical part of a well-managed business that will help minimise bad debts and improve the cash flow in your business. Improving the management of your debtor book can release important cash flow into your business and help avoid the need to pay interest on overdrafts, offer discounts or use expensive invoice discounting. In any business cash is still king. You can run a business without profits, but you cannot run a business without cash. Having cash to make payments on time will improve your own credit terms with suppliers. In other words, managing your debtor book can help keep those juggled balls in the air.
Credit control requires specialist skills together with the right systems and processes in place at the business and the right processes or systems does not mean expensive software it often involves simple processes that start with a basic supplier form that clearly sets out contact names and payment days and the filling in of this form by any potential customer often tell s you a lot about whether they will be a late payer. It’s not just about collecting cash from late paying customers, good credit control is based on building relationships with your customers and creating a rapport with them. Calling a customer to chase money can often be a difficult conversation, especially if you omitted to clearly set out your terms of business form the outset. Also, if you’re not careful you could easily upset them, so it's always best to be polite and professional and to remove the emotional side of things from the call.
Credit management is also about assessing the risk of potential customers from day one, before the sale is even made and deciding how much credit (if any) you are comfortable extending. If you trade with customers over an extended period, you need to keep your credit ratings current and stay on the lookout for the signs of a business in financial distress so you can adjust credit limits limit your risk of getting caught out by a customer going into administration owing you money.
Ensuring that have the requisite knowledge of your customer’s processes and approval systems when it comes to invoicing is also a crucial factor, especially when dealing with larger companies who often omit to tell you that invoice is incorrectly submitted will be filed in a pending tray. It is tough enough getting paid on time without realising 35 days after the invoice is raised that it is wrong and needs re-submitting. With many companies only having one payment run a month nowadays this could result in your business having to wait over 60 days before you receive payment, which could be damaging if the cash flow from that invoice is being relied upon.
Reduce the potential opportunities for people to pay you late, so check that your invoice is up to scratch and meets all legal requirements. Customers will not let you know if there is a problem with your invoice – it will just sit on their disputed pile so it's really important to get it right first time. If you are sending an invoice out to a new customer then it is worth giving them a call a few days after you sent it just to check it has been received.
Dealing with Overdue Invoices
One of the many challenges small businesses face is tactfully, but firmly, securing payment from customers who have disputed an invoice. When this happens, however tempting it might be to try to avoid conflicts, you must not ignore the problem of a late disputed invoice. It certainly won't go away on its own and it's far better to tackle the issue quickly before positions become entrenched.
If an invoice does become late, the Late Payment 2013 regulations give you the statutory right to add late payment interest and compensation charges to the debt. When all reasonable efforts have failed you should escalate the invoice quickly, for example by passing it to a business debt recovery service such as AVC Debt Recovery, which will preclude you from having to listen to yet another excuse for paying late. The cost of the service can be added to the debt as a compensation charge, so in effect your late payer ends up paying for the collection service. It's important that the collection service has teeth and can see the process through to a County Court Judgement (CCJ). This way the debtor knows it's time to pay and most will do so long before such measures are necessary.
Outsourced Credit Control
Few small and medium sized businesses can afford a specialist credit controller and often it is down to an administrator or even the owner to deal with it. This takes up their valuable time when they should be doing what they do best – in most cases that’s winning new business. Many businesses do not realise that this kind service exists let alone that it can be bought on an outsourced basis.
Outsourcing gives you the option of using the service as and when the need arises, therefore it reduces the need of employing specialist staff who you may not have a full time position for.
Why not go and take a look at your debtor book – you will be surprised at how much is sitting in the overdue column – remember that’s your cash and it should be sitting in your bank account!
If you would like further information or advice on managing your debtor books, or to know how AVC Debt Recovery can benefit your company cash flow please contact us.
Looking for Debt Recovery/Collection?
Choosing a Debt Recovery/ Debt Collection Service
You have delivered work OTIF and your patience has reached breaking point. The customer who agreed payment terms has used every excuse in the book (and sometime some that aren’t even in there), not to pay you and played for time at every turn.
Therefore enough is enough. It is important you get your money, but you have to focus on running the rest of your business too. Time to turn to a debt recovery/debt collector for help, but what should you be looking for?
Can’t Pay? We’ll Take it Away.
We have all seen the TV shows featuring large gentlemen intimidating recalcitrant payers into coughing up, the popular image of a debt collector is a large necked man in a suit. We also remember Vinnie Jones in Lock Stock and Two Smoking barrels. This may be the kind of approach some businesses are looking for, but if you value your reputation and brand you are likely to be looking for a more professional approach that approaches debt recovery from the legal standpoint.
The ideal scenario is to get paid whilst continuing to do business with the customer, so sometimes credit control and nudging the customer into the position of payment is the way forward. Whatever happens you must be smart and realistic.
Employing a debt recovery company need not destroy a business relationship, in fact bringing in a third party can remove emotional baggage from the negotiation and leave relationships in better shape after the issue has been resolved.
The Vinnie Jones option is not for business.
A company that employs large necked gentleman with tattoos is not either.
A credit control company that specialises in business debt collection can combine a professional approach with a less aggressive initial contact, quickly ramping up the pressure on the debtor to legal action only if the debtor does not respond positively.
A debt recovery solution that is Free at point of engagement is also an option now thanks to UK government legislation.
Alignment of Interests
Ask yourself what the alignment is with your debt to the ethos of the collection process.
Are you prepared to pay a percentage of the debt to the collector or do you want all the invoiced monies? If you want the former then you need to look at an upfront fixed fee, the latter “No win-No fee”.
Are all interests lined up in the recovery process?
Does the debt recovery company tell you your chances of recovering the monies?
Many legal firms will send an automated threatening legal letter to your debtor for a very small fee. But why would they do this? Clearly its because they hope the debtor ignores it and you have to end up spending money with them taking the debtor through the courts. It’s a simple loss leader for them. The letters have impressive-sounding titles like ‘Letter Before Action’(LBA), but the more it’s used (and there are more and more of legal firms offering this service), the more debtors are getting wise to the idea that the letter costs only a few quid and the threat is empty.
Some debt collection companies charge an upfront fee to work on your behalf or they charge you a percentage of recovered monies. Here the fee of between 10% -20% come out of your monies so you receive 80% - 90% of your monies.
But you can avoid these and instead choose a business that backs itself with a fee that is only charged on successful recovery of your debt . This is called “No win- No fee” debt recovery from a company who use the Late Payment of Commercial Debts (Interest) Act 1998 (2013 Regulations) which enables them to earn money from the addition of fees under late payment legislation. Ultimately most debtors pursued under this methodology do not say, but it is the most effective methodology of debt recovery as the debt recovery company are highly motivated to recover the monies.
All companies who offer “No win- No fee” also operate fixed fee, but many legal firms do not operate “No win – No fee”.
Alignment of the aims is key to choosing your partner in debt recovery as then you know that the company you have chosen has exactly the same interests as you, namely to bring in the most money in the quickest possible time.
Check also that the debt collection company will give you the option to add late payment interest and their fees to the debt to be collected. You now have a statutory right to charge our debtor for these. If these additional sums are successfully collected, the debtor will in effect be paying the debt collector and you’ll be getting the service for nothing.
The Big Stick
It’s important to check that the debt collection service you employ has the capability of taking the case all the way to court in the small number of situations that require it. The reason for this is that the debtor needs to know, deep down, that this has become serious and they really need to deal with your outstanding payment rather than go to court and accrue more cost.
US President Theodore Roosevelt said of foreign policy ‘Speak softly and carry a big stick’. If the polite insistence of your debt collection company is backed up with the credible threat of a court action, then you’re far more likely to get paid quickly and not need to end up in court at all. Check your debt collector has the ability to take your debtor to small claims court, and perhaps more importantly that their website makes it clear to your debtors that this is the case. If the debt recovery company is of the Al Capone type then they will use his phrase on how he got his own way: “… a few kind words and a loaded gun”.
Making the Best
It may be that there are serious financial problems with the debtor company and that you feel that anything you can get out before the train crashes is a bonus. A good debt recovery company will enact credit checks and advise on the chances of a payment. Where it become a case of “impossible to pay " rather than "won’t pay” then a good debt recovery company will not take your money or take the job on. However, when push comes to shove a good debt recovery agency will enable payment. Where financial issues are the case, it is often best if your debt collector can help you agree a payment plan where the debtor pays you in instalments over a few months, with the aim of getting paid ahead of other creditors. Check your debt collection company will negotiate for you rather than just insisting on full payment immediately and driving you into a costly and ultimately fruitless court case. Remember it is not a win if the debtor goes pop and has no assets to cover your debt. It isn’t a win till it’s in (your account). That and the fat lady singing of course.
Here at AVC Debt Recovery we work closely to align the needs of our clients to ensure they receive their monies as fast as possible offering a Free debt recovery service under Late Payment legislation and fixed fee work.
The Late Payment of Commercial Debts Regulations 2013 apply to all contracts entered into on or after 16 March 2013.
AVC Debt Recovery sets out those areas you may wish to look at in your agreements relating to your payment terms.
The original legislation is The Late Payment of Commercial Debts (Interest) Act 1998, which is often referred to.
The aim of the Regulations is to encourage prompt payment of invoices - a continuing issue that may become a problem for all businesses. Recently the government stated that £34.2bn was outstanding as late payments and often larger businesses paying small suppliers are at fault. Late payment affects everybody, but particularly small suppliers suffering cashflow problems, particularly so in the current climate where margins seem to be shrinking.
Time limits for payment
There are now time limits for payment, depending on who you are contracting with:
Public authorities: 30 days unless the contract stipulates a shorter period for payment. This period runs from the later of the date of the invoice or the receipt, acceptance (or, where the contract provides for it, verification) of the goods or services.
Private businesses: 30 days unless the contract contains an express clause on payment. Any express clause may allow up to 60 days from the later of the date of the invoice or receipt, acceptance (or, where the contract provides for it, verification) of the goods or services.
It is possible to agree more than 60 days provided the agreement is in writing and such terms are not “grossly unfair”.
“Grossly unfair” means anything which, in the circumstances, is a gross deviation from good commercial practice and contrary to good faith and fair dealing. As this is a new concept under English law it will be interesting to see how the courts apply this in practice.
What if payment is late?
Under the Regulations the creditor can charge the following:
interest at a rate of 8% over the Bank of England base rate (or such other rate as is agreed);
a fixed statutory charge or compensation charge of £40, £70 or £100 depending on the size of the outstanding debt; and
any other reasonable recovery costs incurred.
What should I do about this?
We recommend that:
you review your standard terms of sale and purchase or any agreements or terms and conditions to see whether any amendments are needed;
When reviewing any new contracts, you enact simple checks and keep a look out for any clauses or terms which may not be in line of the new rules.
Here at AVC Debt Recovery we offer a full service including contract checking, credit control and invoice chasing at fixed cost as well as full recovery services tailoring the best practice to enable clients to get paid with a view to retaining the customer.
Higher than average levels of optimism and boundless drive are the fuel behind many business entrepreneurs but, they’re not always water tight with their business controls, and a lack of planning can land you in hot water.
Being taken to court is not a pleasant experience for anyone, but for a small business legal proceedings can be disastrous and place an inordinate strain on your resources and entrepreneurs are often at risk of litigation due to business controls not always being in place and sometimes, being ignored.
Litigation (or even the threat of it) is bad news with time, money, reputation and uncertainty eating away at the core of your business and in the worst case scenarios, potentially ruining it.
So what do you do when someone threatens you with court action?
Proactively mitigating your risk is a good start!
Check your contract or any agreement to see if what is being stated to you is correct and there is a dispute.
If your business is threatened with legal action, your priority should be to minimize the impact. Sometimes the best course of action for your business may not be your preferred outcome, particularly if emotion and price get involved. So you first need to identify and evaluate exactly what’s happening, the alternatives and base decisions on common commercial sense and reason, rather than emotion.
Don’t delay in getting advice
Whilst it’s tempting to ignore a demand or claim letter, don’t ignore a threat of legal proceedings in the hope that the problem will just go away - though you can certainly try to test out whether the other party is just using the threat of litigation, to bully you into submission. A familiar tactic faced by many small business owners.
In any event, even if you fervently believe that the threat of legal action is without any foundation, the chances are that you will end up pay more in time & cash if you don’t seek some immediate legal guidance to understand your position. Knowledge is power etc.
Consider the strength of your position asap and if necessary, have an initial chat with someone experienced in this type of dispute resolution.
Not only should you receive sensible commercial advice, but you can also obtain an impartial perspective on what might by that stage, have become personal and confrontational.
Don’t Forget ….Your business comes first
There is a good chance that you’ll avoid formal proceedings, particularly if you nip any problem in the bud.
Why not use an old fashioned strategy to begin with …. talking! Most conflict can be resolved by communication.
If you can’t amicably sort out your issues and reach some common ground, explore more formal avenues of alternative dispute resolution – including mediation.
Settling out of court is usually quicker and cost-effective than going to court. In the UK, judges expect parties to have undergone some attempt at resolution before reaching court – and there are adverse cost consequences for not doing so.
If you are unable to avoid court
Once a dispute has reached court, there are 3 possible outcomes;
CW Contract Law and Legal
Fixed Price Legal Services.
This article was written by Andrew Weaver, CEO Lawyer Fair
Lawyer Fair offer a free service to help businesses find the right lawyer at the fairest price.
Contracts, Agreements and Terms and Conditions. Their Relevance when Selling a Business
Your contracts and agreements are extremely valuable. If your contracts and agreements are not up to scratch then the process of a business sale can often bring any shortcomings into sharp focus and there is a risk that buyer may seek a price reduction or a potential buyer may walk away from the deal. Therefore best practice in scrutinising contracts is a potential source of revenue.
Selling a business is based upon the simple premise that someone wants to purchase your hard work and input, but it can become fraught with potential obstacles when your commercial dealings are looked at and scrutinised through an in-depth due diligence process to make sure that your business is worth what you think it is.
Before any communication or following any agreement and diligence starts you might wish to look at the following:
Are you covered for anti bribery compliance? Often overlooked, but we live in a global economy and remember that USA raided FIFA in Switzerland because monies were paid through USA banks and if your buyer is American they will insist upon anti-bribery compliance.
In short, perhaps it is best not to wait until you sell your business to check your contracts.
Here at CW Contract law and Legal we offer a fixed fee contract, agreement and terms and conditions checking service that tells you where your potential liabilities are.
How legal disclaimers work on websites.
The business of today almost demands that you run a business with a website and it is now cheap to build and run your own website, but you need to be aware that websites can owe a duty of care to those who visit them and then rely upon the information contained in that website.
If your business website contains posts, opinion or guidance which those people reading or using it may rely upon, you should think about incorporating a legal disclaimer and exclusion of liability.
Disclaimers are designed to overcome potential litigation. They remove the suggestion that loss can be attributed to something you have said on your website and in circumstances where it was reasonable for that person to rely on what you said. So readers rely upon website content at their own risk.
If your legal disclaimers are clearly visible on your website then it is hard for a user to suggest that they haven’t seen them. Businesses often insert legal disclaimers at the bottom of each page. In order to gain maximum protection, website users can also be asked to expressly agree to the terms of your website by clicking an “I accept” button.
Here at CW Contract Law and Legal we never advise to use BOLD CAPITALS as that is the equivalent of shouting at your customer in the manner of Basil Fawlty.
Use explicit wording in your legal disclaimers. The law is constantly changing and so it’s best to get legal advice if you are unsure about anything regarding website warnings. Ensure that you cover the key areas:
Rights to information published
Be explicit about the IP and copyright on your website and what users can do with published information. Businesses often restrict use to personal use. The aim is to protect your business against a misuse of information. You can also expressly state that any content submitted to your website becomes your property.
You are responsible for the quality and accuracy of information on your website. You can limit liability by explaining that the content on your website is for information purposes only, not intended to constitute professional advice, and that the information will not always be up to date. So visitors who use your website and rely on any information do so at their own risk.
Restrictions on who can use the website
Depending on your website content, you can restrict access to certain age groups or to some geographical locations (for example, over 16 or 18 years of age and an explanation that the material only applies in the UK).
Limit exposure on external links
It has become commonplace for business to link to external websites. However, you may want a legal disclaimer which limits any further liability; stating that you are not responsible for the content or reliability of any other website and that you do not necessarily endorse views expressed within them.
Right to remove, reuse or reproduce material.
Always set out your right to remove. Your business does not want to be in a position later down the line where you need to ask permission to remove, reuse or reproduce content so be explicit in your disclaimer.
Liability of website users
It is a good idea to expressly state that website users must not use your website in any way which is unlawful, illegal, fraudulent or harmful. Again it is best practice to reiterate that your business accepts no responsibility for any loss or harm incurred.
Limit liability for viruses, damage and availability – you don’t want to be held to account for any of these risks if something goes wrong. Add a legal disclaimer which states that it is the responsibility of website users to manage their own access, security and virus issues.
Specify that your website operates under the law of England & Wales English Law and that any disputes will take place under the jurisdiction of English law. This ought to prevent you being pursued in a foreign court under a law which would not apply in a UK jurisdiction.
Please remember you can never limit liability for making fraudulent claims and you cannot limit all liability as death or personal injury caused by negligence cannot be excluded, but you can cover yourself using legal disclaimers.
To get in touch visit us at www.cwcontractlawandlegal.co.uk or call us on 0161 333 121 for a no charge no obligation discussion about how we can add value to your business proposition from fixed price legal services.
Whether you are two shareholders or several hundred, it is vital to have a shareholders’ agreement drafted to your unique requirements.
What is a shareholder's agreement?
A shareholder’s agreement manages the relationship between directors and shareholders within a business and allows directors to focus on the running of the business whilst providing protections for shareholders.
Many people think that shareholders agreements relate to large corporations and think of large boardrooms as set out in the films, but many small businesses and SME’s operate shareholder agreements and often fail to put in place a basic agreement and issues arise when there are the minimum number of 2 shareholders with work allocations and specialities to be agreed.
It is very important that a shareholder’s agreement is specifically drafted to the individual requirements of the company, and addresses the specific needs of shareholders or groups of shareholders. For example, the agreement can be used to:
Clearly set out loan repayments and dividends;
control the decision making powers of directors ;
set the company’s dividend policy ;
put in place procedures which the company must follow for share transfers or on a sale of the company either to protect minority shareholders’ interests; or
clearly allocate areas of responsibility;
determine what happens to shares if a shareholder becomes bankrupt;
the employment of an appointed director with the company is terminated;
a shareholder dies;
place restraint of trade provisions on shareholders, restricting their ability to compete against the company .
Failure to put a shareholder’s agreement in place results in greater uncertainty in the event of a dispute or if an unexpected event occurs. Without an agreement in place it will be harder to resolve disputes between shareholders quickly –if at all and then the law becomes expensive and that is where it can get scary.
To get in touch visit us at www.cwcontractlawandlegal.co.uk or call us on 0161 333 121, for a no charge no obligation discussion about how we can add value to your business proposition through fixed price legal services.
CW Contract Law and Legal Commercial agents guide
COMMERCIAL AGENTS GUIDE
Commercial agents can be valuable to any business. By working for a number of clients, or because of his contacts, a commercial agent can extend the marketing reach of the business and bring in customers which it otherwise could not obtain. However, commercial agents enjoy substantial legal protection which is not unlike that given to employees. Both parties need to be aware of the position.
In 1993, the Commercial Agents (Council Directive) Regulations 1993 were introduced pursuant to EU directive to bring the UK into line with other member states, notably France and Germany.
As so often happens with UK legislation imported from the EU, the regulations are not as clear as they should be. Whatever may be said about the shortcomings of English Law it is often better drafted than European law. Unfortunately the English tradition of clarity has not been carried into these regulations. In particular, the Regulations themselves do not deal with how compensation payments are to be calculated.
What is important is to realise the impact of these Regulation on agency contracts and the damages that may be payable on termination. It is hoped this guide will provide a good starting point for both agents and principals.
1. What is a commercial agent?
The regulations say that a commercial agent is a self employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another person (the "principal"), or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of that principal.
However, a person who has power to enter into commitments on behalf of a company in his capacity as an officer of a company is not a commercial agent. Neither is a partner acting as a partner in his firm.
2. Duties of and to a commercial agent
A principal owes duties to a commercial agent:-
An agent owes duties to the principal:-
The parties cannot contract out of these duties.
3. Remuneration of commercial agents
Rules make provisions which include the following:-
4. Duration and termination of the agency contract
Each of the agent and the principal is entitled to receive from the other on request a signed statement setting out the terms of the agency.
Where an agency contract is for a fixed term but continues after the end of that term, it is converted into a contract for an indefinite period.
Where there is a contract for an indefinite period, either party may terminate it by notice. The periods of notice are:-
Shorter periods may not be agreed, but longer ones can be. However, if longer periods are agreed, the notice to be given by the principal may not be shorter than the notice to be given by the agent.
Unless otherwise agreed, notice must be given to coincide with the end of a calendar month.
These rules do not prevent immediate termination for breach or exceptional circumstances where the general law permits.
5. Compensation for agent on termination of the agency
It is very important to realise that on termination of an agency, the agent may well be entitled to claim damages (which can be substantial) from the principal. This may be payable whether or not the contract is terminated in breach of contract by the principal.
The rules provide that on termination the agent is entitled either to be indemnified OR to compensation for damage.
An agent is only entitled to an indemnity if that method of compensation is specified in the agency agreement. If the agreement is silent on that point, or there is no written agreement, the agent will be entitled to compensation.
The Regulations set out the basis upon which an agent will be entitled to receive an indemnity. Two tests apply; firstly, the agent must have brought the principal new customers or have significantly increased the volume of business with existing customers and the principal is continuing to derive substantial benefits from this business.
Secondly, the payment of an indemnity must be equitable, having regard to all of the circumstances and in particular, the commission the agent has lost on transactions with those customers.
If the above tests are satisfied, then the Regulations set an upper limit on the amount of the payment. That is said to be one year’s average commission calculated with reference to the commission received in the preceding five years (or if less than five years the actual period).
Where the agent is entitled to compensation the rule is that the agent is entitled to compensation for the damage he suffers as a result of the termination of his relations with his principal. The rules are rather vague about how compensation is to be calculated.
Until 2007, there had been considerable debate about the exact method to be adopted in calculating the agent’s loss. However, in July of that year, this was decided by the House of Lords (as they then were) in a case called Lonsdale v Howard & Hallam Limited (Lonsdale v Howard & Hallam Limited  UKHL 32)
The Law Lords decided that the damage suffered by the agent on termination of the agency relationship was the loss of the value of the agency relationship. They said that the value of the agency lies in the future income stream that it would have generated and it is this which must be valued. Valuing the agency relationship requires the parties to assess what a hypothetical purchaser might reasonably have been willing to pay for the agency as at the date of termination. Essentially, they said that compensation is based on the value of the goodwill in the agent’s business.
In order to assess the value of the business and what a hypothetical purchaser might pay, it will usually be necessary for an agent to obtain expert evidence. This is effectively an accounting exercise and the principles that apply are much the same as one would adopt when valuing a business for sale on the open market. Although it should be noted that in Lonsdale, the Lords set out a number of factors that should be taken into account.
Surprisingly, the agent is entitled to compensation if the contract ends because of his death.
Agents should take note that an agent loses his right to claim if he fails to notify the principal within a year of the end of the contract that he intends to make a claim This does not mean a court action needs to be brought, just that the principal is notified. This is best done in writing.
6. Where compensation does not apply
The rights to compensation and/or indemnity is lost where:-
Turing this round, this means that an agent can claim damages if he himself terminates his contract because he wants to retire or because he is too ill to carry on. It also means that where a principal terminates due to an agent’s breach, damages may be payable unless that breach is so serious that it would justify the principal terminating immediately.
It should also be noted that the parties cannot contract out of the rules for compensation and indemnity to the detriment of the agent.
Compensation or Indemnity?
It can be difficult to work out which is the method to adopt when negotiating a new agency contract. On the one hand, an indemnity requires satisfaction of the two tests and sets an upper limit. On the other hand, compensation is based on goodwill and has no upper limit.
In practice, each contract should be looked at in context. For example, in a growing business with large volumes of sales being concluded by an agent, an indemnity might limit the damages whereas compensation might be very costly.
7. Restraint of trade clauses
A restraint of trade clause is an agreement restricting the business activities of a commercial agent after the agency contract comes to an end.
A restraint of trade clause is valid only if and to the extent that:
There is a maximum restriction period of two years.
Any such clause must also satisfy the usual common law tests of validity and must not be in unreasonable restraint of trade.
As you will have seen, the Regulations will significantly affect the relationship between agent and principal. This guide is only intended to be an outline of the legal position and should not be used as a substitute for talking proper legal advice.
If you are thinking about entering into a contract (whether as agent or principal) that might be affected by the Regulations, we recommend you seek advice first. Equally, if you are already in such a contract and the issue of termination is on the horizon, take advice quickly or if you are worried about the threat of termination then take advice.
All too often people look for a remedy where parties were unaware of the Regulations or their extent and this has resulted in costly litigation.
At CW Contract Law and Legal we specialise in contacts. For a no obligation discussion please call 0333 121 0161, or email firstname.lastname@example.org
8. Further information
Visit the government website legislation.co.uk for the full text of the Regulations.
The Regulations have been amended twice since made. Be aware that the Regulations as they appear on that site are as originally enacted. Changes made after enactment are not incorporated into the text.
Here at AVC Debt Recovery we advise all our clients that prevention is better than collection, even if total prevention means we will effectively be out of business. Whilst nothing can prevent a common cold or a bad payer here are our top tips.
If you are experiencing any issues with late payments and are worried that a later payer may turn into a bad debt please call us for a no obligation consultation with a debt recovery expert.
Claiming Monies You are Owed Via the County Court System
What scene comes to mind when you think about making a legal claim for monies owed to your business? If you’re imagining a scene out of the TV or films with people in wigs and sharp tongued barristers interrupting on points of law, and being able to turn cases in their client’s favour, or Deidre Rashid (Barlow) standing in the dock) in a creaking wooden box, then you’re perfectly normal.
However, you are completely wrong and this image of a court endures in the public consciousness precisely because of its intimidating nature and the power of TV and film to shape our consciousness. A court scenario is manna from heaven for film makers and novelists, such a John Grisham, who like to build tension. However, it means very little to real people seeking their monies as a debt in the modern world of commerce and business
In fact, many cases never see a Judge, let alone a stern faced Judge and never ever see Judge John Deed or Judge Rinder.
The Real World
We always say to everybody that court is the last resort because it is not an exact science, so once you’ve made all reasonable attempts to secure payment, it’s time for AVC Debt Recovery to get on the telephone and if we cannot secure the monies via an agreement then we send your ‘Letter Before Action’, or LBA to the person owing you money. The purpose of the LBA is two fold: one is to tell them you mean business, and two, to give the debtor official notice that legal proceedings will be enacted and .
In some cases the LBA acts to jolt the debtor into paying; therefore extinguishing the need for legal action. If this doesn’t happen, the following four stages will apply:
1: Gathering Information
Top of our list is getting all the information necessary to establish what the claim is and what the chances are of winning, and making sure that there is no flaws in the case for you. This includes, all emails, communications along with the debtors details Once we have that then we advise clients on putting together the Particulars of Claim. This is a brief summary of what is owed, why it is owed and details of any statutory fees, reasonable administration charges under the 2013 late Payment legislation, interest and court fees that are added to the debt.
2: Sending your Claim
Once this is done an N1 claim form will be filled in and will be sent online to the Money Claim Online and AVC Debt Recovery will ensure that the Acknowledgment of Service is filed.
Stage 3: Logging your claim
Claim data is then entered into the Court Service computer system. At this point the case is allocated a claim number, which is a unique reference that identifies the case. The N1 claim form is then stamped by the Court and sent direct to the debtor, who has limited time to respond.
4: Wait and see
If the debtor doesn’t respond to the N1 claim form within 14 days, then a request for Judgment can be made in the case. This is known as ‘Default Judgment’, and will be entered irrespective of the merits, or otherwise, of your case. At this point enforcement action to recover the debt may begin. If there is a response then the Court system is not the fastest so there is often a lull in the proceedings. However, once the claim number is lodged the case will be seen by a Judge and it will be heard. It could be that the Judge orders mediation.
What if the claim is defended by the debtor?
Of course, the debtor will have the opportunity to file a defence and defend your claim if they so wish. At this point many undisputed debts suddenly become disputed, but this should not worry anybody. The right to a hearing is enshrined in law so the chances are that the case could end up in front of a Judge. However, on average only 16% of cases are defended, with only 3% ever reaching trial. That gives you a very good chance of achieving success without even having to set foot in a court room.
In the unlikely event that your case does go to trial, you would be expected to attend either as a litigant in person (with representation) or sending a solicitor, but that is added cost.
Upon attendance you will find the court to be a very different place to the one you might have imagined. That’s because today’s courts are convened in modern office buildings and are presided over by Judges who try to speak in plain English and stop to explain as often as possible rather than talking the language of the legal world. Any Judge will listen carefully to both sides before making and explaining a judgment based on evidence and the law.
Of course, sometimes the law is an ass and you always stand the chance of losing, but if your case is sound and you are owed the monies then the final legal process is painless and AVC Debt Recovery make it easy for you.
As you can see, making a legal claim is not as set out on the TV and films and is actually quite a mundane process that is designed to enable us to you give you maximum return with minimum stress. This means you have every reason to feel comfortable and confident in using AVC Debt Recovery on a no win no fee basis to pursue the monies you are owed. All you pay are any court fees and disbursements you request.
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