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Letter Before Action (LBA)

After you have finished chasing up using the telephone then the first step in the debt recovery process is to send a Letter before Action to the debtor. An LBA is a formal written notice outlining the debt owed and demanding payment within a specified period (usually 14 or 30 days). It should include the following information:

1. The total amount of debt owed
2. A clear breakdown of the debt, including any interest or charges
3. Details of the agreement under which the debt was incurred
4. The deadline for payment and consequences of non-payment
5. Reference to the possibility of legal action if the debt remains unpaid

If the debtor does not respond to the LBA or refuses to pay, the creditor can proceed with legal action.

Understanding the Letter Before Action in the UK for Debt Recovery

A Letter Before Action (LBA) is a crucial step in the debt recovery process in the UK. It is a formal, written notice sent by the creditor to the debtor, outlining the outstanding debt and demanding payment within a specified timeframe. The LBA serves as a final warning to the debtor before legal action is initiated, and it is a requirement under the pre-action protocols for debt claims, as outlined in the Civil Procedure Rules (CPR).

An LBA must adhere to specific legal requirements to be considered valid. These requirements ensure that the debtor is provided with sufficient information to understand the claim and the consequences of non-payment. A legally compliant LBA must include:

1. The creditor's name and contact information
2. A clear statement that the letter is a formal Letter Before Action
3. A detailed breakdown of the debt, including the principal amount, any interest accrued, and any additional charges or fees
4. The basis on which the debt was incurred, such as a contract, agreement, or invoice
5. The timeframe for the debtor to respond and make the payment set out ion days.
6. The consequences of non-payment, including the possibility of legal action and the potential for additional costs
7. A reference to any relevant pre-action protocols, such as the Pre-Action Protocol for Debt Claims under the CPR
8. Legislation and Protocol References

The LBA process is governed by various legislative and regulatory frameworks, including:

1. Civil Procedure Rules (CPR) - The LBA is a requirement under the pre-action protocols for debt claims, as stipulated in the CPR. The protocols outline the steps and procedures that parties must follow before initiating court proceedings, and they encourage the resolution of disputes without the need for litigation.
2. Pre-Action Protocol for Debt Claims - This specific protocol, which is part of the CPR, provides detailed guidance on the information that must be included in an LBA and the steps creditors must follow when attempting to recover a debt from an individual or a sole trader.
3. Late Payment of Commercial Debts (Interest) Act 1998 - This Act allows creditors to charge interest and recover debt recovery costs for late payments in commercial transactions. When the LBA is being sent for a commercial debt, it should reference this Act and provide a breakdown of the interest and costs being claimed under it.

A Letter Before Action is a critical component of the debt recovery process in the UK. Creditors must ensure that their LBA meets the legal requirements and references the relevant legislation and protocols. If the debtor fails to respond or disputes the debt, the creditor can proceed with legal action in compliance with the Civil Procedure Rules.

Can you collect debts that are more than 6 years old?

The limitation period for collection of debts is 6 years from the date the debt became payable and after that time they may become statute barred.  This means that the debt is no longer recoverable, including by legal action in the courts.

However, it is always worth checking that your debt is actually statute barred.  If any of the following apply, then it might not be:

1. Have any payments been made towards the debt in the last 6 years?
2. Has the debtor contacted you to find out the balance owing or to acknowledge the debt in any way in writing?
3. Has Court action been taken already?

The rule  of thumb is  don’t allow any debt to go beyond 3 months.

6 debt collection Fables that are Wrong

Debt collection agencies can be a fantastic resource in the fight against late payment and bad debt. But unfortunately age-old fables about debt collection services exist, scaring many away from using their services. The first one to dispel that is not listed here is the perception of Tony Soprano types from the movies

Employ the right agency and you could recover what you are owed.

Fable 1: It’s Expensive

Fact: Here at AVC Debt Recovery we offer no win no fee a standard and an analysis and consultation for free. Yes a truly free lunch. Therefore we only get paid once we have collected your debt. This will be a percentage of what we successfully recover. The price of our services will be minimal compared to the amount you would lose if you had to write the debt off as uncollectable, and the cash flow implications of it remaining outstanding for longer. Additionally, we have a successful track record in adding fees to get you 100% of the owed debt.

The cost of a call to find out whether you have a collectable debt is a small price.

Fable 2: Customers won’t like it

Fact: We understand that maintaining your customer relationships is extremely important and will take your brand and ethos as seriously as you do, but remember, a won’t pay is not a great customer to have and if someone takes offense to being asked to pay for your hard work you may not want them as a customer. We always seek to remind people the effect their poor payment is having. Although it is true that some might not like the fact you’ve instructed a debt collection agency, you’ve only done so because they haven’t paid you in the first place.

Fable 3: It’s only for big companies

Fact: Any debt over £600.00 will be collected  by AVC Debt Recovery and every company big or small can take advantage of our tenacity.  Using AVC is thinking like a big company and recognising that chasing late payment is not your expertise and is a drain u=on your skill set. When you only have a small team it’s unlikely you’ll have the time or resources to chase late payment without having to neglect key business tasks, such as selling and production.

Fable 4: It’s only for really old debts

Fact: Research shows that the earlier a debt is referred, the more likely it is to be collected. There is always a potential cost trade off, but time always equals better results in this area. You can chase any invoice up to 6 years, but the reality is most debts over 2 years are tough to collect.

Fable 5: A solicitor is more effective

Fact: The reality is that although solicitors must enact litigation in court they can be an impediment as costs are added before you get started and always seek their fees regardless of results. At AVC we work on results and are the gold medal standard of collection as if we do not collect we do not get paid. As such we prioritise recovering the unpaid sums by working your customer, preserving your valuable relationship, before taking the legal avenue, and have the expertise to do so when the time is right. In addition, unlike solicitors, we manage the legal process at no extra cost.

Fable 6: It will damage my brand

Fact: If you do not receive payment for Goods and Services your brand will be irreparably damaged as you will not be able to meet your outgoings. Brands only exist because people pay and here at AVC we will respect and enhance your brand and your right to be paid as much as you do by using our expertise to help you get paid sooner.

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How effective are Business Debt Recovery/Collection agencies?

If your internal credit control or processes are struggling to recover unpaid monies, then getting professional help from a business debt recovery agency could be the answer. But how can you be sure of a successful outcome?

Putting an overdue debt in the hands of a debt recovery agency can seem like a big step, particularly if the debtor is a valued customer. Therefore, when you make the decision to seek professional debt recovery support, it's important to be sure that it's a course of action that can deliver results.

Not all debts are collectable, but a good debt recovery agency will focus on the way to achieve a positive outcomes, especially as the best ones such as AVC Debt Recovery offer no win no fee as standard while acting with the integrity based upon the way you do business. Sometimes, introducing a third party professional is enough to get results. There are many documented cases where the creditor has been chasing the debt for some time without success, yet contact from a debt recovery agency does the trick.

There are a number of factors which can make a significant difference to the potential effectiveness of a debt recovery agency.

Have you taken legal action?

If you have  then the general rule is that a CCJ gives you more leverage, but remember getting a CCJ is often the easy part, which is where a debt recovery agency comes into their ow. As a general rule, good debt recovery agencies advise at point of engagement  of the possible requirement of obtaining having the legal authority of a County Court Judgment (CCJ) and the costs and whether they manage the court process. A CCJ alone may be enough to help persuade the debtor to settle their overdue account.

No sign-up fee

All the best agencies offer no win no fee as standard with a fixed commission rate, whether it takes the agency a single day to recover your debt or an entire year or longer if both parties seek to continue the fight..

Attention to detail

The integrity of a paper trail can be a key factor in a debt collection agency's performance. That means having robust systems in place to ensure your quotations and invoices carry all the relevant information including accurate client contact details and clearly expressed terms of business. Some debts are as a result of faulty admin, rather than a reluctance or inability to settle a debt.

Don't delay

Whilst invoices remain valid for 6 years form issue if you're going to put a debt in the hands of a debt recovery agency, it pays to act sooner rather than later. The longer an account remains unpaid, the more difficult it can be to recover the debt. Over a period of time, a debtor's circumstances can change significantly, as can their status and solvency.

Of course, there will always be industries where debt collection is simpler and more successful. Here at AVC Debt Recovery we use tried and tested methods and expertise as well thinking outside of the box. We also have the legal expertise and persistence. That means you are signing up to create a formidable partnership when you engage us.

We are so confident  in our ability and confidence to get your monies we manage any court issue process at no extra charge save for a £10.00 issue fee with the court.

Nobody else in England  offers that service or has the confidence to invest their legal time.

Whatever the size of your business or the sector in which you operate, we're here to help you get your monies into your account. Not only that but w also offer contract law follow up to help reduce your potential debt issues and reduce your liability

Business Debt Recovery

Starting legal proceedings, whilst  a powerful tool to have in the armoury, should always be the last resort when it comes to debt recovery. That’s because reminding a debtor of their responsibilities, along with the potential consequences of not paying, can often be the catalyst to secure payment. Within correspondence this is done through a document known as a Letter Before Action, or LBA.

However, if you are forced into claiming your monies via the court it in important to be able to show you took all reasonable steps to avoid taking legal action. This is where a good LBA can help you even if it failed to secure payment beforehand. A clearly written LBA will also contain a number of important details in order to give the debtor little or no room for manoeuvre when attempting to defend the action.

Sounds difficult? Well don’t worry because help is at hand. To make sure you get your LBA right, we’ve compiled a list of 12 things to include, and here it is:

1. Ensure you use the legal entity and correct address so the debtor cannot deny receiving the LBA.
2. If sending an LBA by email, always make sure it is a letter attached to an email not just an email.
3. Use your reference code that identifies the works and relates to the works and issued invoices.
4. Similarly, always use their reference if requested.
5. Be certain that you use the correct date(s) of works enacted and invoices issued
6. Make it absolutely clear that you are seeking your monies as debt recovery and quote the relevant Acts and issue a Statutory charge under the relevant Act (s) .
7. Always specify the exact amount that is outstanding.
8. Notify how the debtor can contact you in case the amount owed is disputed.
9. Include a payment deadline and explain the consequences of failing to pay.
10. Also include any details of additional debt recovery fees, interest and/or compensation.
11. Remind the debtor that any CCJ, if obtained, will affect their credit rating.
12. Specify how and where the payment should be made.

With these 12 important points included you should be able to construct an LBA that give you a better chance to get paid the monies you are owed..

Alternatively you can seek to hire a professional such as AVC debt recovery. We are the only company to offer a Free LBA on our website as well as a Free no obligation consultation and offer no win no fee business debt recovery as standard.

What to Look for in Business Debt Recovery/ Business Debt 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.

Debt Reminder Letters – Step by Step Approach

The aftermath of Covid 19 will be used as an excuse by some companies to pay even further beyond terms or in some case to seek not to pay at all.

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 and use the telephone alongside email and letter.. 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 on point at all times.

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. You may not recover 100% of your money, but 80%-85% of something (your money) is always better than 100% of nothing.

Free Debt Recovery Tips

Richi Sunak has set out a Winter Economy plan, but this will not stop the fallout that the Coronavirus outbreak has created which has  torpedoed the finances of thousands of successful and healthy businesses across the UK. 

Consumers have tightened their belts, clients have cancelled orders and debtors are slower or unable to pay. The impact is widespread and cuts deep.

Whilst many companies will continue to be able to pay their invoices and debts there will be businesses and individuals in business who will seek to become slow payers or worse still non payers.

Increasingly, businesses are trying to understand their debt recovery options and whether the use of profession debt recovery agencies is a better way forward whilst the ned to focus on sales is paramount.

6 debt collection Fables that are Wrong

Debt collection agencies can be a fantastic resource in the fight against late payment and bad debt. But unfortunately age-old fables about debt collection services exist, scaring many away from using their services. The first one to dispel that is not listed here is the perception of Tony Soprano types from the movies

Employ the right agency and you could recover what you are owed.

Fable 1: It’s Expensive

Fact: Here at AVC Debt Recovery we offer no win no fee a standard and an analysis and consultation for free. Yes a truly free lunch. Therefore we only get paid once we have collected your debt. This will be a percentage of what we successfully recover. The price of our services will be minimal compared to the amount you would lose if you had to write the debt off as uncollectable, and the cash flow implications of it remaining outstanding for longer. Additionally, we have a successful track record in adding fees to get you 100% of the owed debt.

The cost of a call to find out whether you have a collectable debt is a small price.

Fable 2: Customers won’t like it

Fact: We understand that maintaining your customer relationships is extremely important and will take your brand and ethos as seriously as you do, but remember, a won’t pay is not a great customer to have and if someone takes offense to being asked to pay for your hard work you may not want them as a customer. We always seek to remind people the effect their poor payment is having. Although it is true that some might not like the fact you’ve instructed a debt collection agency, you’ve only done so because they haven’t paid you in the first place.

Fable 3: It’s only for big companies

Fact: Any debt over £600.00 will be collected  by AVC Debt Recovery and every company big or small can take advantage of our tenacity.  Using AVC is thinking like a big company and recognising that chasing late payment is not your expertise and is a drain u=on your skill set. When you only have a small team it’s unlikely you’ll have the time or resources to chase late payment without having to neglect key business tasks, such as selling and production.

Fable 4: It’s only for really old debts

Fact: Research shows that the earlier a debt is referred, the more likely it is to be collected. There is always a potential cost trade off, but time always equals better results in this area. You can chase any invoice up to 6 years, but the reality is most debts over 2 years are tough to collect.

Fable 5: A solicitor is more effective

Fact: The reality is that although solicitors must enact litigation in court they can be an impediment as costs are added before you get started and always seek their fees regardless of results. At AVC we work on results and are the gold medal standard of collection as if we do not collect we do not get paid. As such we prioritise recovering the unpaid sums by working your customer, preserving your valuable relationship, before taking the legal avenue, and have the expertise to do so when the time is right. In addition, unlike solicitors, we manage the legal process at no extra cost.

Fable 6: It will damage my brand

Fact: If you do not receive payment for Goods and Services your brand will be irreparably damaged as you will not be able to meet your outgoings. Brands only exist because people pay and here at AVC we will respect and enhance your brand and your right to be paid as much as you do by using our expertise to help you get paid sooner.

Small Business Debt collection

Keeping on top of late-paying customers or clients is crucial for business success. There have been several studies which highlight the problems caused by late payments. Research suggests that around 76% of all UK businesses are being paid late and it may only get worse. This can place businesses into serious financial difficulties, and perilously close to becoming insolvent. The Federation of Small Businesses have long shouted about the need to end the late payment culture, which is a very real problem impacting the majority of businesses in the UK.

Small business credit control/debt collection is an important part of the way we work as we are one of the few debt recovery companies that look at the debt the reasons for the debt and better ways to stop debt issues. Whilst our remedies effectively put us out of the business of business debt recovery, we seek to be proactive in preventing bad debts accruing and minimise the disruption (and maximise the return) when they do.

How to keep late payments to a minimum

Completely avoiding late payments is never realistic (even we get them) but there are ways you can minimise it.

Here is our checklist for effective credit control:

1. Have a clear credit control procedure.
   1. Invoice promptly.
   2. As soon as payment is late pick up the telephone as this will tell you whether there is an issue will help to flush out any disputes or problems with the invoice.
   3. Follow up with a letter
   4. Follow up in 3 days with a telephone call and get a fixed date for payment
   5. If this is not adhered to  send a stern letter or LBA demand for payment
   6. If nothing is received pass the debt over for small business debt collection. Do not delay.
2. Get some Terms and Conditions and use them.

1. If it’s good enough for Amazon a t he world’s most successful company then it should be good enough for everybody.
2. Do not trade without sending your Ts & Cs.
3. Do not have  set? Visit www.cwcontrcatlaw and legal .co.uk for a set for around £240.00
4. Always confirm an order with an email that clearly satte4s. Please find attached a set of our Terms and Conditions and always send you Ts & Cs last.

3. Know your customer and obtain as much information about them as possible at the outset.
   1. Who exactly are you contracting with? A sole trader, a limited company or a partnership? Simply having the name of the business e.g. the shop name or restaurant name is not enough. You need to know the entity which you are contracting with
   2. Credit check customers where possible.

How to keep a good relationship with your customers when dealing with debt

It can be tricky dealing with late payments, but if someone is offended by you asking for money which they agreed to pay you on a certain date we wonder whether you can afford them as a customer.

By using a specialist professional agency such as AVC Debt recovery you can depersonalise the collection process and play good cop bad cop.

Inform debtors that the last thing you wish to do is pass the matter on.

In most cases, threatening us of debt recovery won't do any damage to your business relationship; but if it does you may consider you can afford not to be a busy fool.

Of course, debt recovery is not a free lunch and despite what some companies say the average recovery of the index debt is around 85% , but in most cases AVC Debt recovery recover 100% of the index debt thanks to HM Government late payment law.

Small business debt recovery: issuing a County Court Claim

If no payment or response is received during the pre-litigation stage, then recourse can be sought via a County Court Claim. Taking a customer to Court can be a difficult decision and AVC Debt recovery are one of the few companies that manages the debt recovery legal process at no charge.

There are pros and cons:

Pros:

1. The debt may be taken more seriously by your customer when they receive a claim from the Court
2. It is a relatively cheap way to pursue the unpaid invoice as the Court fee varies from £60.00 to 5% of the value of the claim, dependent on the claimed amount. This fee is recoverable from the debtor, should you be successful
3. The claim often acts as an incentive for the debtor to pay
4. They do not want to spend time and money defending the proceedings
5. They do not want a Judgment to impact their ability to gain credit
6. There are many ways of enforcing the Judgment, depending on the debtor's circumstances.

Cons:

1. It is not an exact science. Only a fool seeks to sit in front of a Judge if there is a better way.
2. The claim itself may not result in payment. We always say the easy part is obtaining judgement.
3. The debtor may still refuse to make a payment or ignore the claim. If this is the case, we will need to proceed to enforcing the Judgment
4. The debtor may defend the claim, which could lead to complex proceedings
5. Enforcement of the Judgment is not always successful. Numerous factors come into play, such as the debtor's assets/finances, or the debtor's employment status.

What happens if a debt is defended?

We take on your case with the creditor as the Claimant in person. We have  a 90%-win track record in court cases.

Enforcement of your Judgment

If we are successful with your claim for unpaid invoices you will obtain a County Court Judgment, which is an enforceable Court Order. This will usually order the debtor to make payment of the debt, interest and costs immediately.

As we only take business debts on that are above the High Court enforcement threshold, we enact enforcement via the High Court.

Insolvency

We also seek recourse to insolvency procedures.

Why use a debt collection for a small business service?

Using a debt recovery service, which is based around the analysis of the law of contract  means you have expertise and experience on your side. Typically, using our modus operandi means the chances of recovering the monies owed to you are greatly improved, as debtors will often take the claim much more seriously after receiving a claim from us. Chasing debtors is a time consuming and potentially frustrating part of running a business. From small debt recovery services to dealing with large amounts of unpaid debt, passing your unpaid invoices over to a debt recovery agency will give you peace of mind that the debtor is being chased for payment, whilst you continue with the day-to-day running of your business.

For us it’s an easy answer We take on any debt over £600.00 on a no win no fee basis if it passes our criteria of 51% chance of success, but that means you must be prepared to back yourself by paying the court claim issue fee to the court and act as a Claimant in person.

Starting at the beginning, a well written letter can often be all that you need to get your customer to pay. We are the only company who offer a free letter before action via our website. A well drafted letter from you with legal wording shows you mean business and is often enough to ‘wake up’ your debtor into paying. If not then this is where we come in because we are not offering £5.00 solicitors letters, we are pure debt recovery and combine all the facets of contract law knowledge and instinct and application of the understanding of human nature.

Some debts are unrecoverable, which is where our pre acceptance analytical model prove sits worth as we advise people against their potential losses of we cannot collect. We never advise anybody to chase a debt that is unrecoverable as if we do not get your money we do not eat. Some debts require the issue of court proceedings and obtaining a judgment against the customer as the only way to make them pay. We charge the court issue fee plus a £10-£20 administration charge and nobody in the UK matches this offer.

Why £600.00

Only debts that exceed £600 can be transferred up to the High Court and enforced by High Court Enforcement Officers. High Court Enforcement Officers are officers of the High Court of England and Wales responsible for enforcing judgements of the High Court, often by seizing goods or repossessing property. They are paid on a commission basis and are often self-employed so they are as hungry as us and the adage that a hungry fighter is a good fighter has never changed.

We let others chase debts below the £600 threshold, as that uses the County Court. However, due to the County Court receiving so many instructions it can in fact be a slower way of recovering any money owed at the present time. County Court bailiffs are salaried and have a year to undertake three visits to try to recover the debt.

Having said all of this, a solid credit control procedure can be all that is required to avoid the need for debt recovery altogether. So what does this look like?

When a potential client comes to you, they may be very keen to get things moving, but you still need to get the paperwork right. It should be your first priority to set out clearly your payment terms in your contract conditions, particularly in respect of requesting a deposit with any booking. We also advise companies to look at their terms and conditions and are the only debt recovery company who actively seek to stop debts by a full follow up contract law analysis and covering the rights of consumers that prevents the protection of the Late Payment of Commercial Debts (Interest) Act 1998.

Ou experience tells us that in most cases it is worth pursuing your debts. Ideally, your credit control procedures and terms and conditions mean you will not have any issues, but if you do call the professionals and we also offer a free no obligation business debt recovery consultation.

Some offers are too good to be true. All we say is if you want the best chance of getting your monies into your account call the company for an offer nobody else in the UK can match. 

What do you do, when someone threatens your business with litigation?

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;

1. Still do what you can to reach an agreement with the other party otherwise,
   1. the court will either dismiss the claim or
   2. make a judgement

Is Your Business losing money by failing to use the Late Payment law?

Late payment remains one of the biggest problems for UK businesses. However, late payment law is available to protect businesses from late paying customers. We liken not using late payment legislation to  HM Government deciding not to bother collecting speeding fines in case they upset motorists..   

What is late payment law?

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 it is only applicable to business transactions, the aim of the Act is to discourage the culture of late payment.

When is a payment late?

If your commercial contract specifies a date upon which payment should be made then it will be considered late if it is not received by this time. However a company that isues immediate payment terms would probably not be able to issue a late payment penalty on every invoice.

We always say that payment terms should be set out at point of sale, but if a commercial contract does not state when payment should be made, the Late Payment of Commercial Debts (Interest) Act 1998 comes into force. Under the law, payment must be made within 30 days of either the invoice being received; the goods/services being received or the goods/services being accepted. If payment is not made within this timeframe, it is classed as late.

How much compensation can I claim?

Late payment compensation can be added to each qualifying debt. The following fixed sums can be claimed as compensation

•           £40 compensation for invoices up to £1,000

•           £70 compensation for invoices between £1,000 - £10,000

•           £100 compensation for invoices over £10,000.

If you have several invoices that are outstanding, the compensation you can claim could be significant.

How much interest can I claim?

Late payment interest is typically claimed at 8% above the Bank of England base rate, so as at today 8.25% down form 8.75% but the Court has the discretion to award interest at a rate that it believes is fair. Interest is calculated from the date the invoice becomes due until the date payment is made.

Can I claim the costs of collecting my debts?

Technically yes. Whilst the compensation is intended to cover the costs of debt collection, this isn’t always the case in practice. If a contract is signed after March 2013, the Late Payment of Commercial Debts Regulations 2013 are applicable and these allow companies to claim back any additional costs of recovering the debt, providing they are reasonable.

Utilising the Late Payment law

Although the law seesk to protect businesses from the damaging effects of late payments, some companies and organisations have been reluctant to use it in case they alienate a customer, but the late payer does not seem to have such qualms. In some instances, people assume that instigating reasonable requests top pay will harm commercial relationships.

However, late payment law can be used to recover debts without souring existing business arrangements. Many businesses that use the late payment law still maintain good relationships with their customers and continue to trade with them.

Debt Recovery : Why Our Free Letter Before Action Can Help You

 Being very British (where it takes 3 years to find the door to leave) we also seem to have a reticence about asking other businesses to pay on time after we deliver them goods and services. If only we could apply this logic to HMRC when they come knocking for our tax returns or we could extend our stay in an hotel gratis because we feel like it.

Put simply using the wording of our LBA which is free on https://www.avcdebtrecovery.com/business-debt-recovery-services/free-letter-before-action-for-business-debt-recovery/

 is an effective methodology and better than the three stage letter format that seems to be taught in credit control college.

Analysis has shown that a legally worded letter that mentions the potential of an outside collector is far more likely to bring you your monies than repeated letters. If that is allied to a telephone call you will increase your chances of recovery even further. At a minimum it will give you the gut feel of whether a late payer has the potential to become a bad debt.

 It has been stated SMEs are now waiting on average 64 days from the date the invoice is due before sending any letter that might be classed as a letter before action. This is due to the attempt to maintain business relationships and services. Why, do people get offended if you ask them to pay you what is agreed? We always ask if people would wait the same amount of time if their heating broke down?

By using the legal wording which we provide for Free, you will be saving a lot of time and money which could be used to further your business.

 Of course, if your actions and our Free letter wording fails then it pays to call in a professional company such as AVC Debt Recovery who offer no win non fee as standard.

Getting Your Monies : Business & Commercial Debt Recovery

Post Covid (not that it is yet post Covid)  every business will be feeling the pinch and some companies will seek to improve their cashflow by restricting your cashflow by paying you more slowly. As a business, it’s important that you get paid what you’re owed by your customers/clients. Late payments, and people trying to avoid paying for goods and services, can be costly to your business and have long-lasting and damaging repercussions.

Here are seven basic tips

1. Invoice as normal

The process for debt recovery should begin with you invoicing promptly and making sure your invoices are correctly issued. Payment terms should have been agreed before any sales or services are delivered so there are no ambiguities.

2. Chase

If it turns out that you haven’t been paid then you should have a process of chasing up the invoice. This could involve you sending additional emails or making phone calls to politely remind the client that they need to pay for the work you’ve completed for them, otherwise the situation will continue to escalate. Here we advise telephone as the first port of call, but a chasing process is a must and make sure you record what you chase and what is agreed from the chase.

3. Credit hold

Do not be afraid of this measure as this is a great prompt. Stop doing any work for them until they have paid their outstanding debt to you.

This is sometimes referred to as a credit hold or administrative hold, whereby work on an account stops due to a lack of funding.

In most cases, this is likely to solve the problem as a business might suffer without the services you are providing to them. However, if this doesn’t result in you receiving your payment then you do have other options.

4. Final notice

The final notice is the last piece of correspondence you’re likely to send the client, before legal proceedings begin. This highlights to them that they have until a certain deadline, which you can decide, to settle any debts with you, before you begin pursuing legal action against them to claim the money you’re owed.

If this final notice doesn’t see your client settle any outstanding payments with your business, then you have different options to pursue when considering legal action.

5. Legal action

Your last resort is to pursue legal action against your customer/client  if you seek to do it yourself whereby you would probably seek the services of the County court via small claims or if it is over £10,000 it goes into a different track; or

6. Debt Recovery

You can hire the experts such as AVC Debt Recovery who will not only seek to pursue your debt, but will give you the advice you require as 66% of County Court judgements never get satisfied (paid). As debt recovery professionals our track record of recovery is much higher.

7. Analysis

This nearly always overlooked once monies have been recovered.

1. Did our sales process have enough focus on who was going to pay me and when?
2. Was my credit checking process robust enough?
3. Did we set out my payment terms?
4. Did our terms and conditions stand up when tested?
5. Did our overall processes stand up to the test?

Learning from the processes above allows us not to repeat errors. Any business will be lucky to escape without a bad debt, but having issues then repeating them by only focusing on the sales element is not failing to plan it is planning to fail.

Get your FREE Letters Before Action (LBAs) with CW Contract Law and Legal and AVC Debt Recovery

Hi there

Research from the market leading debt recovery solictors has shown that correct use of an LBA has an 86% success rate in recovering debts with no further action required. Visit https://www.avcdebtrecovery.com/services-business-debt-recovery/free-letter-before-action-for-business-debt-recovery/f and download our template and take advantage of the only free lunch on the entire internet. Yes FREE.  

Take action and inform late payers that you mean business. It that does not work then we are the only debt recovery company that offers No Win No Fee as standard and a free contract law analysis.

Our deliverable and service will not only save you the time and hassle of chasing debtors, but we have a track record of getting your monies into your account. If we do not we do not charge you.

Please note that alongside our free LBA and tips on how to improve your credit control we are unique in that we offer  a terms and conditions service that is proven to reduce your exposure to bad debts and gives you an added tool in your bag. No such thing as a free lunch? Try it.

Improve Your Credit Control

Remember at all times that cash is king, so avoid being a busy fool and improve your credit control.  It isn’t offensive to ask at point of sale who is going to pay you and have they got enough money to do so, but it is offensive to not get paid.

Too many companies give the wrong signals when it comes to asking the questions you should ask at point of sale.  if you are lax in following up with customers to check that your invoices have arrived safely and are on their ledgers, they may assume you are similarly relaxed when it comes to payment due dates.

Ensuring invoices are paid in a timely fashion can become an art for many credit controllers, in terms of striking the right balance between being proactive versus not wishing to agitate trusted customers.

 There are a few different ways in which you can help to avoid delays:

1. Send invoices by both email and post – this way it is more difficult for the client to make the argument that they did not receive it.
2. Ensure that details are clear and correct – a more straightforward invoice will be less likely to incur questions around why it was raised, which can also be used to slow down the payments process.
3. Include clear payment terms and conditions in the initial contract. The trusted email please find attached our terms and conditions, which can then easily be referred back to when required.
4. If you do take on a new client that you are unsure about, do not be afraid to request advanced payment so that this is made before products/services are supplied.

Ten ways to improve your chances of success when settling disputes

If your business is involved in a commercial dispute, you need to understand how to deal with the pressure and apply it on the other party when trying to reach a settlement. We say to everybody never think that the law is on your side any you will prevail and never take someone on as a matter of principle. Always follow the money.

Settling a dispute satisfactorily can save your business a lot of money, effort and anxiety. So, what is the key to getting a favourable outcome?

1. Know which terms apply

Whether written, oral or both, knowing which contract terms you're arguing over enables you to apply more pressure. If you're claiming that your standard contract terms apply, for example, and can show the other side agreed to them, you're in a much better position.

If a specific agreement was being negotiated but you started work before a final agreement was signed off, you're in a weaker position. If a contract is partly in writing and partly oral, what you said and did (custom)while performing the contract can count against you if there's a later dispute about what was agreed orally. If terms are ambiguous or unclear, the court will decide what a reasonable person would have thought you agreed - and that might not be what you think you agreed.

2. Keep adequate records

Maintain proper written record of negotiations leading up to the contract in dispute (send a simple email when you agree what is agreed), because the court will sometimes look at pre-contract negotiations to construe what the parties intended in the eventual contract. Parties without proper records will have a harder time arguing the accuracy of their version of events.

3. Don't make offers that later prejudice you

Negotiate in confidence. Know when making your settlement offer that 'without prejudice' means it can't be referred to in court to your possible detriment if negotiations break down. However, just adding the words 'without prejudice' is not enough: they must be attached to a genuine offer to resolve a dispute.

4. Deal with someone with the necessary authority

The other side may try to argue that the person with whom you negotiated lacked authority to make the contract (especially if they've since left) and this is a classic negotiating tool of the Japanese. However,  if their title implied they had authority or was put out to you as authorised to enact any agreement then you are on stronger ground..

5. Ensure proper handover of information

If the employee who negotiated the contract on your behalf is to leave, make sure there is a proper handover of information, with full notes and a debrief. Otherwise you'll find it hard to rebut allegations about what they said. Keep their emails filed sequentially. Ensure your personnel procedures show a clear defined audit trail.

6. Don't just ignore it

If you ignore or fail to take action in any dispute or don't rebut points raised by the other side, there is a chance a court may later see this an admission of being in the wrong.

7. Don't rush to court

The threat of court is always stronger than court itself. The court process is a blunt instrument and often death by a thousand procedures. There are alternatives, such as mediation, commercial dispute resolution or arbitration, which can lead to a quicker and cheaper settlement. If you're going to court, some types of dispute require specific protocols, for example, putting your case and providing information to the other side, which is designed to encourage settlement before it reaches court. Failure to do so means you risk being penalised in costs at any subsequent court hearing.

8. Don't dig in on your strict legal rights

Negotiating from a position of certainty about your legal position always sounds good, but English law is based on precedent and there is always another Judge who turns over the strongest position, so bear that in mind when you shout "see you in court," where often the only winners are the legal fraternity, who always get paid. Relying on your strict legal rights is akin to relying on politician to answer a question truthfully – it can leave you disappointed..

9. Learn to recognise tactics

For example, if you're taking someone to court they can tell basic lies which makes you madder and less flexible and stops you thinking clearly.

In any negotiation the other side is never a strong as you think they are and the law is pretty much the same.

Assess the strength of your case and assess your time and focus costs as any loss of focus on sales is a cost.

10. Get the wording of your settlement right

The courts are full of cases where the wording of settlements has left businesses out of pocket. For example, a payment in settlement of "all claims made" in a construction dispute didn't prevent a new claim being raised afterwards in relation to the same job – because the words "all claims made" don't cover future claims.

Late payments causing you a headache? Securing Payment could be easier than you think

For many businesses, maintaining the balance between timely payments and healthy customer relationships can often feel like a difficult task. But in 2018, speeding up the payments process can be much easier - and more straightforward - than you might think.

You can visit our website ww.avcdebtrecovery.com and download a free letter before action and tips. This often secures payment without the need for further action.

Many businesses do not realise that it is enshrined in law to claim interest and compensation to help ease your inconvenience. Under the Late Payment of Commercial Debts (Interest) Act 1998 and subsequent amendments, you can claim interest and receive fixed-sum compensation if payment isn’t received.

Compensation brackets are as follows: £40 for invoices up to £1,000; £70 for invoices between £1,000and £10,000 and £100 for invoices over £10,000

Many businesses have a perception that chasing late paying customers through a debt recovery agency could damage relationships with their customers but this is often fear for fear’s sake as our experience is that customers have no objection to paying what is rightfully due to our clients and the relationship between the two parties often continues with future trading – if you want to that is..

By failing to deal with late payments, businesses are suffering financial damage by not asserting their late payment law rights. Late payment doesn’t only affect your bottom line – it can also put your cashflow and day-to-day operations at risk and threaten your survival. It’s important to get what you’re owed without unnecessary delay, and taking a professional approach to this process is vital.

As specialists in debt recovery and negotiation we have found that communication from us (telephone, letter and email, we use the full range and don’t use the three stagte form letter approach adopted by many solicitors ) is far more effective in moving a late payer to action.

Reminder letters from businesses that are owed are often ignored especially when adopting the English reserve (“We are really sorry to contact you to ask for our monies” – “oh you are short of cash this this month” “So sorry to call” - Yes we have heard that call before) of asking for monies you are due. Solicitors like to state that calls from debt recovery agencies are not always welcome, but whilst the TV amd movie  persona  projected does legitimate one’s no favours (have you seen the latest incarnation money lender in Coronation Street?)  our involvement as part of your credit control process can be extremely useful. Thanks to the efficiency of the AVC Debt recovery business model, we inject impetus or as the French put it the élan of AVC Debt Recovery and our coast effectiveness adds value to your business.

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:

Dear Sirs

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.

The steps Small Businesses should take when chasing debt

(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.

How to control potential bad debt as a small business

As a small business (which make up over 90% of all UK businesses) it’s safe to say one of the hardest challenges you will have to face is making sure you have cash to run your business. Here are a few tips to you to help you with your finances.

Don’t be afraid of debt

Debt is a scary concept, but keeping debt under control is a crucial aspect of any business. It’s as import as making the sale, if not more important from the moment you make the sale. So plan ahead and look at all aspects of the cost of making the sale including credit checks.

Don’t ignore your outstanding invoices

If you don’t keep an  eye of the monies owed ledger at the expense of selling and other issues then. The key is control -  being aware and taking action.

Regularly revisit your invoices outstanding column

Once you have set your payment terms keep simple spreadsheet  tables showing days overdue and if it starts to creep up ask yourself why. Make sure whoever is doing the invoicing is also happy to do the chasing as some people are not multi taskers when it comes to chasing money and are happy to accept that the decision maker on paying is not in the office.. As your business evolves the income and outgoings will too, so keep on top of your budget.

Seek advice on debt recovery

It’s never a bad idea to talk to a professional company such as AVC Debt Recovery who can help you recover monies quickly and efficiently . If you are unsure contact a professional.

Controlling your monies owed ledger is the most crucial aspect of your business after making a sale and once you have made one it becomes the most crucial. What is important is understanding what works for you, but to make sure you are consciously and vigilantly making your debt control a priority. Remember, domn’t leta later payer become a bad debt

Prevent Late Payments Going Forward

Take these simple steps to improve your chances ensure timely payments in 2019.

1. Issue professional looking invoices: 

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.

2. Issue accurate invoices: 

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.

3. Send timely invoices: 

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.

4. Don’t issue immediate payment terms

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.

5. Set out for late payment penalties in your Ts & Cs

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.

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.

1. You do not have a process at point of agreeing the order for invoicing

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.

2. Your Business practices are passive

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.

3. They are not satisfied with the Product/Service

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.

4. The business you supplied have Cash flow issues

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.

5. Your Business doesn't know the Late Payment Law

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. 

What advantages does a bespoke letter from AVC Debt Recovery have over other standard debt collection letters?

Collecting monies you are owed (debts) can prove to be a tricky task. Many people we speak to voice concerns about the difficulties of chasing a debt, without chasing away their clients. Debt collection practices have come under the spotlight in recent years, with many people expressing a negative opinion towards unorthodox debt recovery methods. A debt recovery letter from us allied to our proactive use of the telephone may be more beneficial to you than a standard from letter from a debt collection agency.

It is all about the detail of your business that we include that differentiates us.

An AVC Debt Recovery letter comes with a lot of benefits. One of the main ones is that we have asked you for the information that is required to ensure the specifics are in the letter and we can align it with the regulations and potential pitfalls when chasing a debt. We want you to retain the client, but we are tasked by you with being assertive to get your monies into your account.

The law on late payment is quite clear and there for a reason, so nobody should be frightened to set that out to a non-paying client, with clear concise non emotive language. A letter from AVC Debt Recovery can be just as quick and cost effective as more traditional debt collection methods, but will additionally provide a more formal and sincere way of requesting payment before legal action is escalated.

We provide you more options

Four Good reasons to outsourcing Business Debt Recovery and Commercial Debt Collection

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. 

5 Points To Consider When looking to enact Business Debt Collection when Recovering Debt

Recovering debts is never easy. Even for big corporations with legal departments or access to legal firms. We are a legal services company who specialise in debt recovery with no win no fee being our standard offer.  Here are 5 points you should consider when recovering your debt.

1. Information is Key

Keeping clear concise records on invoices and invoicing as well as information on the debtor and how much is owed is crucial to effective debt recovery. Good record keeping enables you to track how long payment hasn't been made and adjust interest attributed from late invoices.  Having information on who makes payments also puts you in the best position in terms of reaching out to them and coming to an agreement before taking further action. Good information puts you in a strong position if the debtor decides to dispute your case. Some debts are not collectable because of the lack of information.

2. How will recovery services integrate with my company?

Align you credit control cash collection with the deliverables of your business.  Make sure everybody from the salesperson to the customer service understands the phrase who will be paying us and when will we get paid.

3. Assess Your Options

 When looking to recover a debt you need to access what the right steps are to recovering the debt efficiently. You may need to ask yourself:  is the debt owed by an individual or a business? Are the debtors fully aware of your terms and conditions? Have you contacted the debtor to seek an arrangement to preserve the trading relationship?

• Are you intending to chase the debt first before engaging a debt recovery specialist?
• What is my time trade off to chase debts against selling and doing what I do best?
• Is the debt disputed?
• Is the debtor solvent?

These are one of many questions a good debt recovery agency asks.

4. Use The Law on Late Payment

The Late Payment of Commercial Debts (Interest) Act 1998 helps, but also makes sure you have a set of terms and conditions then enables you to charge interest and levy charges to recover debts.

5. Consider Outsourcing to Specialist debt collection firms

Outsourcing your debt recovery can help reduce your costs as you will stop spending money on overheads such as employing extra staff to chase payment. When you use a debt collection agency there is a higher success rate of recovering money. Customers are more likely to pay if they receive a letter and a call from someone they know means business.

When a payment becomes overdue, it's important that you act quickly to collect. The longer it takes for a debt to be recovered, the more difficult the process of recovering becomes. We always say: Don’t let a late payer become a bad debt.

Business Debt Recovery Outside of England

Even in Today’s Brexit world we operate in a globalised business world, more so now the UK seeks to trade with the whole world no just the EU.

Laws travel across borders as often as business does, so it is important that you consider the impact of paperwork, local laws and possible legislative changes when doing business abroad. 

The first point when you agree what you agree is to make sure that ways of working set out in any contractual terms are clear, understood by all parties and nothing suffers a lost in translation moment. As always the dispute resolution aspect is crucial to cover what happens if there is a dispute, non-payment or a claim against your business.

Which Court in which country will have jurisdiction over the dispute and which law applies to any dispute that arises. The simple rule of thumb we tell our clients is use English law and set the term of jurisdiction seat as London.  Start with the maxim used by Julius Caesar (if you want peace prepare for war) that if you want contractual peace (of mind) look to ameliorate any chance of conflict (war).

Looking where problems might arise before they start precludes 9-0% of contractual disputes.

Based upon the start point that it is better to apply English Law and jurisdiction, the best way to ensure that English Law applies and the Courts of England and Wales have exclusive jurisdiction to deal with any dispute or claim arising is to specify exactly that in the contract which is signed by duly authorised representatives of both parties.

Sometimes it is best to obtain a written agreement with a translation signed by both parties. Signatures should be by persons with authority to bind both businesses to an agreement. If you do this remember to set out the precedence of the English language version.

Ideally an original document properly executed as opposed to an exchange of emails Any contract that is dependent upon email exchanges often leads to  arguments over jurisdiction. If, within the contract, a claim is made and set out as a debt and the Debtor resides outside the UK it is not always straight forward to issue proceedings in England and Wales, as  it is always necessary to seek the Court’s permission to start proceedings here. Once you have a judgement here in England then enforcement can be enacted elsewhere. 

Businesses may have a clear understanding of debt recovery legislation in the UK and collecting a debt from abroad doesn’t have to be a tricky issue. The starting point always due diligence and advancing credit to anybody is a dilemma, but to foreign companies seven more so. The approach to credit control should be no different between dealing with a customer in the UK or abroad. In all cases it is vital to know your customer, who are you dealing with and what is their financial worth having taken the appropriate credit checks. 

The same question should always be asked, who is going to pay me, when and how.

Also, remember that whilst UK has left the EU, EU law still applies to your Debtor and can bestow upon them privileges under EU law which you must navigate. For example Germany has strict privacy laws which can prevent tracing. In the UK it can take a significant period of time to obtain a judgement if a matter becomes defended and the claim is in excess of the small claims limit it can eighteen months to two years to bring a case to trial. With the court delays occasioned by Corona Virus there are significant delays to most cases in the UK at present and we would expect this also to be the position throughout Europe and Worldwide. Choice of jurisdiction and researching which jurisdiction is best suited to the particular product or services supplied is an important consideration.  If you are struggling to find the best approach make sure you contract has a found waterfall disputes resolution process that goes sort it out amongst your selves, mediation then binding arbitration as whatever jurisdiction you choose only a fool seeks to sit in front of a judge and they are not cleverer here in the UK than anywhere else.

When working with overseas businesses, it is important to stay aware of warning signs of an inability or unwillingness to pay invoices and take effective action accordingly. Taking “action” early is important and having established procedures in place to do, but whatever you do debt recovery anywhere is not an exact science and any enforcement for a company domiciled outside the UK is not cheap.

Here at AVC Debt Recovery we have collected debts across many countries including but not limited to: Spain, France, Germany, Holland Philippines and Hong Kong.

The key to collecting debts is always prevention is better than cure, so due diligence, adherence to contracts that include English law and replying on your get feeling will solve most problems.

For everything else there is AVC Debt Recovery and CW Contract Law and Legal

Authorities issue warning of Business Debt Collection scam

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.

What to 

Look for in Debt Recovery Debt Collection

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.

If you charge compensation for collecting overdue debts then read this

Introduction

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 Problem

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 [2017] 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.

Conclusion

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.

Duplicate Payment and Debt Collection Questions and Answers

Where someone has made  a duplicate payment of an invoice and the recipient of the duplicate paymnent is slow to return the payment, is it feasible or correct to threaten to apply interest in such circumstances?

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 [2007] UKHL 34.

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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