Everything You Always Wanted To Know About Debt Recovery (But Were Afraid To Ask)

19th January 2018

It’s a scary word, isn’t it?

Debt.

When you think of it, do images of burly bailiffs come to mind?

Or little old ladies crying over receipts?

Or even just a big ball and chain.

The reality isn’t quite so dramatic.

Many, if not all businesses, will experience debt at some point.

Whether it’s bad debt or just late and delayed payment, it is an unfortunate inevitability.

The most important thing to remember is that you can survive it.

Debt is NOT the grim reaper of business.

Why you need our help (even if you won’t admit it)

Even if you don’t have bad debts, you will have slow and late payers.

They may have told you they’ll pay you next week, that quickly turned into a month, and now 6 months have gone by and you feel desolate.

When this happens, and a shortage of cash flow starts looming, it seems easier to get more customers than to attempt debt recovery.

Like covering a blemish with makeup, this will not do.

As of 2017, £44.6bn is owed to SMEs because of late payments.

And a further 1 in 4 insolvencies are caused by the late payment culture of the UK

You will not fix the problem by ignoring it, and this is when external credit management or debt recovery companies come in handy.

While we respect business leaders who want to keep credit control within their own four walls, we cannot stress more the effectiveness of taking advantage of outside help.

Top 5 reasons why you should pass your credit control to a credit management company:

  1. It is our job- it is not yours. As business owners, you have enough to do than worry about credit control. We have professional skills and expertise that we enjoy utilising to achieve a positive result. Let us do the dirty work and the menial administrative tasks that you hate. We love it.
  2. We get results. Sometimes just seeing the name of a third party can motivate the customer to pay in full, particularly a third party with a well-respected reputation such as the Credit Protection Association. They may ignore your statements but once they know you’ve escalated the matter to a credit management company, the customer should finally realise the stakes.
  3. We will make you look good. Connecting your business to such a renowned brand as the Credit Protection Association will immediately enhance your professional standing. We will flush out your bad customers and boost your company on its merits, not its bad payers. We will also encourage your good customers and iron out any gripes or issues with payment so to ease any future payments.
  4. Our involvement makes us responsible for your cash flow, allowing you to concentrate on your business. Wasting your anxiety on credit control is not detrimental to your business, and we can shift your priorities accordingly. We will do all the heavy lifting and allow you return to making sales, keeping your business running smoothly, and keeping your customers happy.
  5. We have the expertise and years of experience, that you, or your company, may not have. We love our job, and we’re good at it. The Credit Protection Association has been in business since 1914 and our staff have decades of experience in fair practice and negotiation tactics, that we are only too eager to share with Members and clients alike.

Ok, I’m hooked. How does it work?

Sometimes, through no fault of your own, the customer will not pay.

Doesn’t matter how many calls you make or how many letters you send, you can’t seem to make any headway.

They may have credit flow issues of their own or even slow payers of their own. Either way, the more time you spend with them, the more damage you risk to your own business.

Therefore, the quickest, and easiest thing to do is to bring in a debt recovery or credit management company, like the Credit Protection Association.

Once you feel sufficient time has gone by and the account remains overdue, we take action.

It’s quite simple.

You supply us with all your information, and more importantly, all the information you have on the debtor.

We then send a carefully crafted series of letters prompting payment directly back to you, our Member.  The success rate for this service is, on average, 84 percent with the biggest impact being in the first week.

We encourage the debtor to pay you directly to allow you the return of your money and the return of your trade relationship as before.

That way, you can have your cake and eat it too!

Why CPA is different than all the others

The Credit Protection Association has always been dedicated to providing an ethical and fair professional environment for its Members and clients.

Many debt recovery agencies ask the customer to pay the debt directly to them, and usually with an added percentage fee for themselves. We are different. Taking ownership of the debt in such a manner can damage the trading relationship between customer and supplier. CPA understands how important that trading relationship is to all our Members, and will always go out of our way to ensure this relationship remains untouched.

Ultimately, it is your money. We don’t want to handle the cash.

Of course, sometimes in litigation cases where the debtor refuses to accept the debt, everything can get a bit messy. But we will always do what we can to reduce the damage.

Our fees are also much simpler and more cost-efficient. As previously mentioned we do not charge a percentage of our overdue accounts service. Every service we provide you and your company is included in the fixed annual subscription you paid when you joined. Occasionally, depending on the case, we will charge a fee if legal action is necessary. However, this can be incorporated into the owed amount and paid for by the debtor.

Most importantly, we are not a debt collection company, or a debt recovery company, or a credit management company; we are all these things. We offer a range of services to improve cash flow and access the suitability of new customers. We have a well-informed company directory and credit application forms to aid these processes.

We understand that running a business demands a lot, and we have built our company accordingly.

We take on debts of all shapes and sizes.

Late and slow payers can do real damage to the cash flow of small and medium-sized businesses.

Nonetheless, many business owners will still use a variety of excuses to put off debt recovery!

It’s too old!

It’s too young!

The amount is too high- I’ll never get it back!

The amount is too low- whats the point!

But these are just that; excuses!

Just a few months ago a new Member came to us with a debt that was already 4 years old! A Letter Before Action (LBA) was sent and the supplier promptly received payment.

Similarly, we were approached by another Member last year with a £8000 debt which went through our legal team, but before a County Court Judgement (CCJ) could be issued they paid our Member directly!

We have dealt with debt as small as 9 pounds and as old as 9 years!

And in either case, we have fought to the tooth to get our Member paid!

It just goes to show, it never hurts to try!

Even if the debtor does not respond immediately, or even if they put up a fight. We still will not give up!

Going Legal.

Unfortunately, there are those customers who put up a fight, and there are those who will even question their right to pay it!

This is when it can get a bit messy and can risk damage to your relationship with the customer.

Of course, the team here at the Credit Protection Association will always do everything possible to keep that relationship intact.

In fact, the legal process may make you question the customer’s suitability for your business. Do you want to risk your business’ success on an unreliable payer?

Fortunately, with the combined efforts of our Members and CPA, only a small percentage of our accounts do require litigation to achieve payment.

But in the case that there is no other choice for you, or for your customer, CPA’s litigation professionals will discuss the case with you so that you may decide the best way to progress.

CPA will advise you of the fixed cost, including court filing fees, along with what you can claim from the debtor.

How to avoid us altogether

As much as we appreciate your business, we understand you’d rather not be here.

So the best way of handling debt is catching it early.

Don’t let that toppling pile of invoices be the first signifier.

6 ways to avoid a debt pile-up

  • Communicate, communicate and communicate some more. Give you customers a chance to discuss potential issues with payment.
  • Get to know your customer and how they operate. Always insist new customers fill out a credit application form, with all information about their financial history. Again, this should give them a chance to let you know about past indiscretion.
  • When an invoice is due, follow up with a courtesy call to ensure they received it. They may respect the reminder and be more encouraged to pay on time.
  • On the other side, ensure your customers know your credit terms- for example, the consequences of paying late. If they know you have provisions in place, general complacency and fatigued payment may be prevented.
  • Offer alternative forms of payment and chasing processes. To make things easier (and less obtrusive) try introducing an automated chasing service such as online payment or automatic reminders for late payment. This should prevent them from embarrassment or from feeling pressured. However, be strong. Don’t let an automated service stop you from communication. If they pay late, take it up with them.
  • Make it easier to pay. While cheques are the traditional form of payment, these are not only unreliable but not always the easiest. If your customer lives in a rural area, trudging to a bank for payment may be an unwelcome effort and may encourage late payment. Why not offer direct debits or standing orders, which should also encourage consistent payment every month.

Some success stories

We don’t like to toot our own horn but…

A couple of months ago, our Member of the manufacturing industry sent us another case that was less than a month old, this time for £16000! We sent the debtor one letter informing them of the debt and telling them to pay the customer directly. Within one week our Member informed us that they had paid in full!

Back in October, we were approached by our Member, a local engineering company. They had a debt that was over 3 months ago and for over £3500! We sent out our first letter but got no response. We then sent a second, and within 24 hours, the Member reported full repayment! They clearly just needed a little push!

Also in October last year, we were approached by our Member, a marine engineering company. They had a case that was over a year old for over £469! We sent one letter to the debtor, encouraging them to pay the balance, and within 8 days it was paid in full! Our member was delighted!

A trickier one was a few months ago, when we were sent a debt that was over 3 years old! Our member had been a little reluctant to pursue the debt, as so much time had past! But just ten days after the first letter from CPA was sent, our member reported a full repayment! It NEVER hurts to try!

How technology has changed the game

Managing an effective credit control team is a difficult thing.

Whether you’re doing the job in-house, or as a credit manager, it is important you have the right skills in place to do the job effectively.

But it is a time-consuming and exhausting job for anyone, whether your team is big, small, or somewhere in the middle.

Over the years certain advancements have been made in business, which has made the debt recovery process easier and more efficient.

Transparency 

Everything is online these days. Whether it’s your birthday, your employment, and even your address, it is all available to everyone.

This new transparency has made credit managers’ job that bit simpler. Trace teams only need to search social media and they have a place of employment and a postal address. Of course, it works both ways, and the art of credit management is now more accessible to people other than credit managers.

Here at the Credit Protection Association, we write daily and weekly blogs and articles for our members which go on our company website and across social media. On this interactive platform, we engage local business owners with videos and articles on even the most complicated and dense credit management topics.

Email

There is an undeniably unreliable nature to snail mail, where debtors have the opportunity to use the infamous “it got lost in the post” excuse.

Email has, therefore, become a reliable form of communication between credit controller and debtor, customer and debtor and customer and supplier. Invoices, bills and correspondence can now be sent by email as a companion to a hard copy. CPA also provides an additional courtesy phone call; just for good measure!

Online banking

You probably can’t think back to a time before you could get everything online. Including your finances. But there was.

Advancements in online banking have not only eased employee’s lives but also their employers. Businesses can now check whether payments have been made, allowing them to spot late payers early. Further smartphone apps have become available given businesses further flexibility with their finances.

Advanced Payment Methods

Online payment methods such as direct debit and standing orders have made payments quicker and more convenient.

While paying by cheque has traditionally been the most popular, it is also the least reliable. By offering payments online or over the phone you can avoid any further excuses such as “the cheque is in the post”.

Automated Payment

Offering an alternative to face-to-face contact provides a simpler and quicker way to pay and negotiate. This more remote approach further reduces an intimidation factor, offering clients a more private environment.

What now?

Debt recovery is a vital process for all businesses; big or small. It combats late and non-payers and keeps businesses running smoothly.

Of course, the easiest solution for your business is to avoid the issue altogether. And the easiest way to do that is to check everything.

Research your customers. Research your suppliers. Research the directors.

Here at the Credit Protection Association, we have a range of credit management products to protect your business’ cash flow. We boast a very thorough company directory for our members to peruse, we also offer credit ratings and credit checks to validate who you do business with. Of course, if you do find yourself in trouble with bad-payers, this blog has set up everything you need to know about debt recovery.

The only thing you need to do? Accept our help!

If you have outstanding debt, unpaid invoices, or are unsure of your debtor’s identity, do not hesitate to get in contact with CPA for help and advice!

Please pass the matter to us as soon as possible as the quicker we act, the more likely we are to be successful!

The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!

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Watch the video to find out how CPA can help you!

How many excuses are there for non-payment?

Click the image to discover step by step advice on how to deal with them!

 

 

 

 

 

Discover how to improve your cashflow in 3 steps.

Click the image to find our answer to the question “How can you get paid on time?”

 

 

 

 

Read our blog – Debt collection agency

Read our Cash Flow Advice

Read about our overdue account recovery service

Read our blog – What is credit management?

Read our blog -What is a credit management company?

Read our blog -Credit Management that works!

Read our blog – How to select a debt collection agency

click to see read about our successes

Please call us on 0330 053 9263 to discuss how CPA can help your cashflow. Alternatively, either email us or use our contact form.

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