How To Get Paid on Time and Collect Old Debt Workshop Presented by: Lindsey Van Der Westhuizen © in partnership with WELCOME TO THE

 Welcome and Introductions  Debt Recovery  Effective Credit Control  Workshop Evaluation AGENDA ©

 UK businesses have invoices worth £15.7 billion over 120 days  UK’s late payment mountain grown to £62.87 billion  Three quarters of SME’s affected by late payment  71% of SME’s in UK suffered over last 12 months RESEARCH © FACTS

 Domino affect  Cash flow affected  Sales and profit affected  Insolvencies / Winding up RESEARCH © THE IMPACT ON BUSINESSES

DEBT RECOVERY ©

 Exercise 1  Common Problems  Do It Yourself  Outsource It  Small Claims Court  Other Options HOW TO FIGHT BACK © DEBT RECOVERY

 Break into 3 groups  Discuss the following and prepare to feedback to the main group: - how old are your debts? - why are you struggling to get paid? - what excuses are you getting from customers?  You have 10 minutes EXERCISE 1 - COMMON PITFALLS © EXERCISE 1

 No structured system in place for credit control  No credit policies or clear guidelines set by the organisation  Skill gaps faced by new/small businesses  Not sure of where to go for help  Unsure of how to overcome excuses  Afraid of upsetting your customer COMMON PITFALLS © COMMON PROBLEMS

 Statements  Reminder letters  Late Payment Fees and Interest  Should I sue?  Winding up petition  Credit Insurance DO IT YOURSELF ©

 The Late Payment of Commercial Debts (interest) Act 1998  Revised in 2002 and again this month  Based on reference rate – reviewed twice a year  Current rate  Late payment fees  Visit APPLYING LATE PAYMENT FEES © LATE PAYMENT FEES AND INTEREST

 Follow ‘normal’ credit control procedures  Make their money on charges, interest or commission  Negotiate/agree charges before collection commences  May negotiate with your debtors  May trace absconded debtors at a cost DEBT COLLECTION AGENCIES ©

 Personal visit to customer  Stop supplying goods/withdrawal of services  Enforce retention of title clause (if appropriate) and reclaims goods  Threat of bad publicity  Ask external body to send letter on your behalf  Write a letter from a different company (if you are part of a group and with permission) ALTERNATIVE TACTICS © ALTERNATIVE METHODS

 Can be effective method of debt recovery  Procedures designed to be quick and easy to operate  Research court procedures and your responsibilities  Seek legal advice, where appropriate  Consider if you have time and can afford the expense  (limit of £100k)  If above £100k issue your claim personally at the county court SHOULD I SUE? ©

 Have I tried all other options?  What is involved?  How much will it cost?  Am I likely to win?  Has my customer got any money to settle debt?  Has my customer got other court judgements against them or pending?  Have I got the time to pursue the debt? © THOUGHTS TO CONSIDER

 Credible threat may produce payment  Threat costs nothing  Statutory demand may be obtained from a solicitor  Will result in loss of further orders  Can be used as part of enforcement of judgement in small claims court  Not attractive option if debt small  Significant costs involved  No priority given over other creditors © WINDING UP / BANKRUPTCY

 Protection against bad debts  Consider size and spread of debts  Good if reliant on one customer, small number of customers or debts concentrated within one sector/area  Strict procedures applied by insurance companies  Can be very expensive  If business financially sound with excellent credit control processes in place insurance may not be an option  Available as part of invoice discounting / factoring arrangements © CREDIT INSURANCE

EFFECTIVE CREDIT CONTROL ©

 Exercise 2  Organisation’s Role  An Effective Credit Controller  Credit Checks  Terms and Conditions  Beware Credit Thieves  Warning Signs  Procedures  Excuses  Telephone Calls  Staying Motivated HOW TO FIGHT BACK © EFFECTIVE CREDIT CONTROL

 Break into 3 groups  Discuss the following and prepare to feedback to the main group: - what should your organisation’s role be? - why are credit controllers so important? - what skills do they need?  You have 10 minutes © EXERCISE 2

 Understands the importance of cash flow  Ensures credit policies and procedures  Sets targets for reducing debt  Supports their credit controller © ORGANISATION’S ROLE

 Ensures continuous cash flow for the business  Controls debtors  Assesses and controls risk  Resolves issues to prevent issues escalating  Understands and applies the organisation’s credit policies and procedures  Is tenacious, self motivated and enthusiastic  An excellent communicator  Calm, cool and collected at all times © AN EFFECTIVE CREDIT CONTROLLER

 Checks credit ratings online  Checks trade and/or bank references  Sets a credit limit according to above and manages each account to minimise risk  Understands customers payment processes  Communicates credit terms in advance  Ensures terms and conditions are issued/signed  Negotiate discounts to encourage early payment  Develops close relationship with accounts payable © AN EFFECTIVE CREDIT CONTROLLER (2)

 Credit Agencies i.e.  Available free as part of Chamber membership  Restricted to limited companies  There are alternative agencies and sources © CREDIT CHECKS (1)

 Trade References  Confirm customer’s name and address  How long have they dealt with them?  What’s the credit terms/do they pay on time?  Limit granted and current outstanding?  Association with customer? © CREDIT CHECKS (2)

 Bank References  Request written permission  Costs £20 to £25  Will take time / interpret the results  Are there any demands for payment made through court? © CREDIT CHECKS (3)

 Companies House  Quick check on basic data: o Company name and registered office address o Current status – active, dormant, liquidation, etc  Access to historic accounts data and director details © CREDIT CHECKS (4)

 Sets out your trading terms and conditions of sale  Protects sellers rights and limits potential liabilities  Includes (amongst other items):  Payment terms  Late payment fees and interest  Retention of title  Insolvency/bankruptcy  Jurisdiction/governing law © TERMS AND CONDITIONS (1)

 Must be signed by both parties  Enforces and gains agreement to your payment terms  Useful in the event of dispute © TERMS AND CONDITIONS (2)

 Trade references – potential given ‘best’ suppliers  Bank references - only as good as monies in account ‘today’  Larger the credit, the deeper the checks, as higher the risk  Keep up with events affecting customers – credit rating can change overnight  Limited companies requesting excessive credit limits  If customers want more, get cash for the extra © BEWARE CREDIT THIEVES!

 Delays in payment get longer  More excuses made  Telephone calls not returned/continuous voice mail  Returned mail  Mistakes made on payments  Penalty charges incurred are not paid  Customers make payments on account  Discounts are taken when not allowed/agreed  Credit profile changes adversely © WARNING SIGNS

 Send invoices out promptly  Copies of invoices to be systematically filed in an organised manner  Call customer to ensure receipt of goods/services and receipt of invoice  Any invoice issues or disputes, resolve immediately  Issue monthly statement of account  Run weekly aged debt analysis reports for review  Telephone week before debt is due to confirm invoice being paid in accordance with credit terms granted © PROCEDURES (1)

 Send a ‘low’ impact letter on day one  Ring customer on day four overdue for payment date  Send a ‘medium’ impact letter on day nine  Contact customer on day fourteen for confirmation of payment date  Send a ‘high’ impact letter on day nineteen - incorporating late payment fees and interest charges  Seven days after sending ‘high’ impact letter issue a solicitor’s seven-day letter  Keep log of all communications when chasing payments © PROCEDURES (2)

 The cheque is in the post  We don’t have an invoice  Our terms are 45 / 60 days  Nobody is in to sign the cheque  You keep getting voic © COMMON EXCUSES / DELAY TACTICS

 When was payment sent?  Resend invoice and follow up receipt  Refer them to signed terms and conditions of sale and your agreed payment terms  Find out when signatories available or if there are alternative payment methods (electronic payments)  Try different times of day, obtain alternative numbers or use other contact methods © OVERCOMING EXCUSES

 Be firm but polite and assertive  Control the phone call  Have a solution for all delay tactics  Practice beforehand when dealing with difficult calls  Escalate to superiors  Develop negotiation/compromise skills © TELEPHONE CALLS

 Set collection targets  Recognise achievements  Develop new skills, gain up-to-date knowledge, through training courses, seminars, etc  Speak to other credit controllers, share hints and tips on effective collection © STAYING MOTIVATED

 – unsatisfied court judgements  – leaflets on claims  Leaflet EX350 – debt recovery for businesses  Leaflet EX302 – how to make a claim  Register of Judgments, Orders and Fines  - log on to members area – Business Information Factsheets – Finance – general factsheets on debt collection available  Free legal advice available to Chamber members through 24/7 legal advice line © FURTHER INFORMATION

 Any questions?  Please complete the workshop evaluation form  What other financial workshops would help your business?  Thank you for your attendance today  Enjoy lunch! © WORKSHOP EVALUATION