Debt Collection in the Hospitality Sector

The hospitality sector can be a troublesome sector to collect debts in. The market can be very seasonal and can suffer many cash flow difficulties. Also it has a high transfer rate and has a high number of sole traders. A single restaurant or hotel site can change it’s name regularly and go through many owners during even one year. We have a small Italian restaurant around the corner from our office which had a long standing owner/proprietor (from Iran not Italy!) up until about 18 months ago. Then overnight he disappeared and they have had a string of 5 or 6 different owners since and has had 3 or 4 different names. If you had been a supplier to this restaurant and hadn’t been paid, would you be sure who owed you the money?

The restaurant isn’t a legal entity, who was the proprietor when the supply was made? Do you know their home address? What paperwork do you have? Or was all this on the basis of a phone call order from an employee?

Many suppliers are just so happy to have the order, the sale that they just assume it is all going to be alright and go ahead with a delivery on the basis of not very much information. You wouldn’t lend money to a stranger on the basis of “I’ll be on this street corner, at this time, please bring the cash!” but they will happily bring their expensive goods to a site and leave it there on the hope that whoever is the owner will pay for it.

We see many suppliers who have been caught out but by the time we get involved it is often too late.

Make sure you get the legal name of the person ordering. If it is a company, get the company name and check it’s credit. If it is a proprietor, get their home address. Get a credit application form completed. Have a proper order. Get a signature on a delivery note. Invoice quickly and correctly address it to the legally responsible person or company. And then if they don’t pay on time, chase promptly.

We recover a lot of money owed in the hospitality trade. We have recovered money even when paperwork has not been what one would hope and there is not much in the way of details.  Our performance is even better though when our members follow our guidance. We can’t talk about the money recovered from individuals but when companies owe the money, we can tell you of our successes.

Ray White, Manager of Our Debt Recovery department was pleased to be able to report a Member in the Hotel sector has had a significant recovery via CPA’s Litigation Department. Back in January 2017, the Member sent us a case for a debt amounting just over £11k, relating to invoices issued back in August 2016. Rather than go down the normal court route, it was felt that after the LBA (Letter Before Action) had been ignored by the debtor, a 21 day Statutory Demand was the way to go. The Stat Demand was drawn up and served on the debtor. The 21 days expired and just as the Winding Up process was about start, the debtor contacted our Member and a settlement of nearly £11k was agreed. We received the payment today and it will be paid out to our Member.

Just looking at the recent results, we recovered some large debts for a client who produces commercial scents. Among their debtors were some small hotels, a hotel chain and number of other hospitality businesses around the country. Most of the debts had been invoiced in January and February and the businesses had withheld payment. Our member passed the debts to us in and within days the payments came flooding in.

A transport company had a six figure debt with a small chain of hotels and despite numerous chases from our member, hadn’t got around to paying the debt. It was put in our hands and one letter later our member had been paid in full.

A joinery did some work last year in 2016 for a business specialising in the short stay cottages market in the west of England. Over a year had gone by since they had invoiced for the work but they still hadn’t been paid. They asked to act and it took a bit of time but a monthly later our member had been paid.

A design company asked us to chase a modest debt owed by a business in the tourist trade in the east of England. It seems the debtor thought no one would do anything over this relatively small debt so had been ignoring demands for payment for months. After a couple of letters from the Credit Protection Association, they were quickly dissuaded of that opinion and payment was grudgingly made.

A waste management company asked us to chase a February invoice from a hotel based near St Albans. Again after months of ignoring our clients own demands, the hotel quickly responded to the Credit Protection Association and payment was arranged.

A business providing serviced apartments to visiting businessmen in the city of London was stalling payment on a large debt to a company in Berkshire. We were happy to confirm payment had been received this week before we had to resort to sending our final demand.

A company that provides commercial training asked us to chase payment from a hotel chain who were clearly in need of some accountancy training as they seemed to have forgotten how to pay their bills. Funny how a letter from the Credit Protection Association can jolt the memory though as payment soon came in.

I haven’t got through half my spreadsheet of our most recent commercial recoveries but I think i have made our point. The Credit Protection Association can prompt punctual payments!

But we can do so much more, using the CPA credit application forms, use CPA status reports and using verifylink to confirm identities, CPA members can make sure they know all about the customer before they take on the credit risk and thus can trade with confidence!

Even then, if payment is not made on time and the client has not responded to your request for payment, the member knows they can pass the debt to CPA and if the debtor has the means to pay, usually we will get it paid. Over 80% of debts passed to us are resolved!

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