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Recover your overdue money: Which software to use?

Asking for your debt to be repaid sounds uncomfortable but a lot of times a mandatory part of being a corporate owner. Typically, reminding them of friendly or courtesy calls is sufficient to bring on the customer to pay up your debt. But, if the debtor is still not responsive, you might go for escalating the situation further. But, you know, that is not a permanent solution.

Recovering overdue payments

Apply the following practices as a guide to recover an overdue payment from your customer. The process begins with a friendly reminder and escalates afterwards. Following all these steps can assist you in trying to conserve your business ties as much as possible.

·         Send a friendly payment reminder

When the payment gets overdue, send your debtor a courtesy reminder by posting a letter, email, or phone. They might have paid the dues into the wrong bank account, or forgotten about the bill, so only a first reminder might do enough to make them pay the invoice.

Make sure that you have included contact information, banking details, and payment options in your kind reminder so that your customer could pay you quickly. If the borrower has not responded to your first reminder, contact them again. Remind them again so that they might respond to your payment request this time

·         Make a direct contact

If there is still no response or payment after your final notice, try to visit the debtor in person. If you had previously contacted them via a letter or email, try to make a phone call this time. In this way, you could build a personal relationship with the customer that could aid in smooth payments in the future.

·         Demand via a formal letter

Now, if nothing mentioned above works, send them a formal letter to demand the payment. It would help if you were careful in doing so, as it could disrupt your business terms with the customer.

·         Seek help from a debt collection agency

If you can’t get paid yourself, try involving a commercial debt recovery agency in the matter. In the past, debt collection agencies could be established without license or authorization. Now, there are various rules and regulations for governing commercial debt collection agencies. So, you can hire the services of a debt recovery agency for the successful recovery of your debt under legal protection. The agency will collect your outstanding invoices from your customer. When you use the services of a commercial debt collection agency, you don’t have to waste time going after the debtors.

Also, keep it into your consideration that you and the debt collector must abide by the particular laws against the banned debt collection practices. Otherwise, you can confront any criminal penalty. Different international organizations and laws, different country and state acts regulate the entire process. Also, you can seek help from dispute resolution as the final resort.

Making invoices, forwarding them out, and have to keep an eye on unpaid dues take up a lot of effort and time. So, online invoicing software is a perfect alternative to the old class accounting systems. With the help of online invoicing software, you can monitor all the processes more efficiently and, resultantly, save a lot of money, energy, and time

What is invoice management software?

Invoice management software assists companies in making invoice-related tasks automatic. When the accounting departments or companies receive invoices, these invoices usually run through a compliance process. After this approval process, their information is matched with purchase and sale orders and also the payments. Invoice management software smoothens this workflow by examining invoices, reading and drawing data into the system, and making the electronic transfer of the money. Among the solutions, one is the mobile application for remote approval and viewing and the account selection and payment collection for every payment. Once the invoices are processed, they are compiled either on premise or in the cloud for easy access for use lately. Such tools will often permit manual data entry for the invoices and the automatic capturing of the data.

Such software solutions aid accounting departments by eradicating mailing checks, manually entering the data, and maintaining the paper records. A wide variety of invoice management tools also integrate with or provide features of other kinds of software such as accounting software, procurement software, and billing software.

To be able to get inclusion in the invoice management category, given product must:

·         Split an invoice into many or consolidate many invoices
·         Pull invoices from some other software or through OCR and scanning
·         Monitor late payments and due dates for AP and AR invoices
·         Scan different kinds of payment, such as partial payments or deposits
·         Match the invoices with sales and purchases orders, as well as with the payments
·         Store invoice documents, along with payment and approval history
·         Apply one payment to multiple invoices, or multiple payments to only one invoice
·         Sync with the accounts of the company for transferring the payments for the approved invoices
·         Offer standard approval workflows that the users can customize

ACE Software

Formerly called WebAR, this software is cloud-based, open-API debt collection forum for government agencies, healthcare providers, property managers, attorneys, and collection agencies. 

This debt-based forum eases SQL reporting, data mapping, trust accounting, report automation, spread posting, highly expendable database, open-office templates for custom letters, custom forms, infinite note field space, unlimited addresses or phone numbers, customized screen layouts, judgment tracking, process automation, customized payment plans, account building, and various associated third party technologies (data enrichment, letters, drops, voicemail, text messaging, email, diaries, and payment processing).

Apart from the ACE software, much other software electronically recovers your overdue recovery without involving manual efforts. Some of the best debt recovery software are PhoneBurner, Simplicity, AutoPal Software, Chaser, FinancialForce Accounting, CasetrackerLaw, BeyondARM, Esker, YayPay, Lockstep Collect, FrontSpin, Insly, Turnkey Lender, InvoiceSherpa, Upflow, Noble Suit, and Case Master Pro, etc. These software solutions are compatible with modern-day business needs and help businesspersons get out of their problems more effectively. 

The Commercial Debt Recovery / Business to Business Debt Recovery. What is it?

Commercial debt recovery shows the collection of delinquent money from one business (the debtor) in place of another business (the creditor). Usually, a third party (a debt collection firm) carries it out. This third party is not supposed to be involved in the original deal between both; the lender party and the subject of the debt party. A commercial debt itself signalizes a debt possessed by a company. Many creditors prefer the business debt recovery that the Debt Collection Agency (DTC) provides because this collection takes up less time. Also, it is more budget-friendly compared with a first-party debt recovery because the collection process is completed under the creditor company’s subdivision. Company debt recovery firms are authorized and perform under the borders of a legal and ethical collection service.

The characteristic profile of commercial debt recovery

Commercial debt recovery also called business business-to-business or “B2B” debt collection. The business-to-business debt itself exhibits a funding loan arrangement for corporate or business investment. Debt Collection Agency’s actions, putting forward business debt recovery, are required when an invoice or payment has become belated. A delayed payment is taken into consideration as such when it has not been settled after the decided deadline (a specific time period; mostly between 1 to 2 months, depending upon the country). Anyhow, this period of time is sound for consumer debts; for commercial debts, the limit of time can be more flexible; from two months to five years, depending upon the type and amount of business debt (long-term, middle-term, or short-term corporate debt).

Business to business debt recovery encompasses all legal and pre-legal collection tools and methods involved in successfully recovering past-due invoices and delinquent amounts. They comprise of tracing services; various kinds of communication, for instance, letters, emails, and phone calls. etc.; intra-agency personal visits; debt bailiffs and solicitors monitoring different payment plans. In some cases, the business debt recovery can comprise the screening profile of the constant debtors as a service (also termed debt portfolio screening) that provides the observation for lousy debt with a precise scoring system. Such a kind of screening can also be used for calculating the future possibilities of bad debt formation, which implies which of the consumer accounts are less or more likely to run into debt.

Commercial debt recovery can also be offered on a transactional or local level. Different international organizations and laws, different country and state acts regulate it. These organizations are CLLA (Commercial Law League Association) for the US, CCA (Commercial Collection Association), etc. Also, the regulating laws include the Late Payments of Commercial Debts (or interest) Act for United Kingdoms and the Directive on Late Payments. When the commercial debt recovery is being provided for more than one country, the collecting agency needs to submit to different laws. Mostly, if this service is offered on an international level, DCA has its lawful representatives present in all the countries of operation.

Commercial debt recovery- fee structure and target clients

Commercial debt recovery focuses on corporate and business clients who owe a large amount of money to any other business firm, also called the creditor here. Its primary concern is unsecured business debts, unfollowed by any collateral, such as health past-due debts, unpaid bills, purchase loans, etc. Commercial debt recovery also covers more complicated massive amounts of money, such as debts caused by various loans for the sake of business funding. When this collection process starts, business DCAs target the accounting and finance department of the company for the sake of covering the debts that are past due.

Business to business debt recovery firms typically take a “collection cost” that involves all expenditures during the entire process of debt recovery. It can comprise of various charges from court actions, hiring debt solicitors and bailiffs, and different other taxes that apply to debtor/creditor.

Commercial DCAs charge different fees. Some of the commercial DCAs charge ahead of time or fix a flat fee per week or month. But, some DCAs collect their fee after successfully recovering the past-due amount (or better call it a no collection no fee policy). Some commercial debt recovery agencies charge their rate of interest on the debtor instead of the creditor. In countries such as Austria, Switzerland, and Germany, the law obliges the subjects of the debt to pay their debts and pay DCAs interest as well. It is also legal in the United Kingdom if the contract has a clause that specifies any such payments. Laws strictly monitor commercial debt recovery’s commission charges. For example, in the United Kingdom, DCA is not authorized to charge any more than an eight percent interest rate and the whole amount of debt that it has to collect from the debtor.

Why hire a commercial debt recovery agency?

For keeping your business afloat, you must receive payment for the services or products you render. Unfortunately, not every customer is trustworthy. In such cases, if you do not have time to collect your debt, collection agencies could help. In the past, debt collection agencies could be established without license or authorization. Now, there are various rules and regulations for governing commercial debt collection agencies. So, you can hire the services of a debt recovery agency for the successful recovery of your debt under legal protection. Also, there are enhanced chances that the debtors pay faster to the collection agencies than you could collect from them.

Moreover, the debt collection agencies keep a record of how many times they contacted the debtor. So, if you want to sue the debtors, there is evidence that you approached them quite often. Also, these agencies have experience collecting debts, so the chances of a debt collecting agency succeeding at collection debt are more than you going for it yourself. Furthermore, when you use the services of a commercial debt collection agency, you don’t have to waste time going after the debtors. So, it saves you energy, money, and time, so you can entirely focus on growing your business, whereas the commercial debt collection agency collects your debt from your customers.

Get Paid On Time. Top Tips For Outstanding Invoices

Receiving invoices paid timely is significant for all businesses in many aspects. This factor ensures the constant cash flow on one side, and has a wide range of benefits on the other side. To manage the debtors is a tough deal to cope with; that is why getting invoices on time saves a lot of money. Having outstanding bills makes the clients less likely to trust you. Consequently, they feel unsafe to spend with you. You will notice an improvement in sales to a satisfying level by getting them to pay well-timed.

Get paid timely is not that in several cases. By practicing the following pro tips, you are more likely to get paid on time:

  • Keeping terms of payment short:

Payment terms must be short to the possible extent. You should be realistic in this regard. For instance, if you set your payment terms like 30 days, your clients might run over your given deadline. So, to avoid this kind of situation, you have to change this term of payment to about 14 days to make a smooth flow of money. Hence, keeping payment terms short will cast an entirely positive impact on your business noticeably.

  • Mentioning your bank details:

For the convenience of your clients, you have to make the process of payment easy to a possible limit. So, in this regard, you should put the respective bank details on the invoice to avoid any mess. You should rely on the bank details, but it will be more convenient for your clients to give them more options to pay. You can have an option for the credit card besides other options.

  • Sending the invoice to the respective individual:

Only the owner of a business doesn’t need to pay the bill; the person you are dealing with in this regard may be a worker. So, you should copy that person on the invoice that you will send without any exception. It is much better to share the invoice with the person processing it and with the one who approves it. So, sharing invoices with the respective individual will ensure the overall transparency of the process.

  • Adding Overdue fees:

When you add the overdue charges to your payments, it will automatically discourage many clients from paying you behind schedule. When they have to pay the penalty for this deed, they will ensure payments within the scheduled due date. It will show them your seriousness towards your business.

  • Chasing Overdue invoices punctually:

To ensure the clarity of your claim, you should keep on following up the Overdue invoices regularly. You can send them reminders by mailing or making their phone calls. Everyone knows that it is not a likable task to make this kind of phone call, but they are necessary to get paid quickly. Clients will notice you being active in dealings, and it will remind them to be responsible in fair dealings.

As you know, this kind of phone call is not like routine calls, so you have to be conscious. Here are some tips to make the debt phone calls:

  • Calling frequently
  • Calling early in the day
  • Behaving professionally
  • Remaining polity
  • Agreeing with the clear payment terms:

First of all, you should make all your terms of payment elaborated in front of your client. This agreement will avoid a lot of disturbances that might arise without this clearance. You can do written work in this regard or a direct contract.

  • Making the invoices intelligible:

Questions arising in the mind of clients may cause them to pay delayed. To eradicate this issue, you should make sure the accuracy and unsophistication. Your invoices must be clear to all the clients and easily understandable.

  • Giving incentives on early payment:

The clients like enjoying the discounts. If you offer them some discounts, it would be better than threatening them with overdue fees. Moreover, offering discounts to the clients indeed makes good sense on business grounds. You can offer them some percentage discount or any other incentive if the client pays you in advance. It will be an encouragement for good clients.

  • Getting invoices out soon possibly:

It would be best to focus on the invoicing method if you focus on getting the invoices out as soon as possible. If you deliver your invoices to the clients in time, you can expect timely payment by clients consequently. Moreover, you can only demand your payments in due time if you are on time as well. Being late in your responsibilities casts a negative impression on your firm.

  • Choosing the impressive invoice templates:

With the advancement of technology, software companies have created many softwares that offer impressive templates to people. Choosing a catchy template will make a huge difference. You should choose a template with attraction, simplicity, and clarity. You can highlight the preliminary information to get more attention. Hence, using some impressive templates boosts up the payment process.

  • Invoicing in phases:

If your project is long-term and has some phases, then it is not fair to send the whole bill once. Instead, you can do it in several phases. It will not burden the payer and make the process of payment convenient and easygoing. You will also be able to manage your cash flow following this method.

  • Do not work until you get paid:

Business is not only the game of cash but of dignity as well. Respect the honor of others and make them do so. When someone refuses to pay the bills, do not work until paid with the proper bill. Recognize such black sheep that deteriorate the smooth flow of your business.

  • Choosing an appropriate invoice:

Firstly, you should plan the payment schedule and discuss it with the customers or clients. Once both parties accept the plan, make the deal done. Prepare an invoice that is relatable to the specific job you are creating the invoice. Your selection declares how sensible you are to your business.

By following the footprints mentioned above, you can make payment dealings much more manageable.

Paying back my Business Bounce Back Loan

There is not a great deal of information ‘out in the wild’ about what a business bounce back loan even is, let alone how to repay one. Essentially this loan is a government-backed scheme intended to allow sole traders and small to medium-sized business access finance quickly during the current pandemic.

Business bounce back loans are unsecured, meaning assets are not at risk, but the lender is responsible for paying back 100% of the loan.

If you haven’t applied for a business bounce back loan, there is still time as applications are still being accepted until the very end of March 2021. The government page on the subject is quite sparse, but scrolling to the end will reward you with a button that will take you on your first step in making an application. To save a little time though, your first step is finding an eligible lender.

The list of accredited lenders that are working with the government on the business bounce back loan scheme is quite long all things considered, but be sure you only apply for this type of loan from one of the listed lenders.

  • What can a Bounce Back Loan be used for?

The bounce-back loan is related only to business finance. This means that it can be used to pay staff wages (including directors), business rates and property rent(s). it can also be used against any monthly business costs and overheads such as internet bills if your business relies on it, phone bills, electricity bills etc.

Company directors can also use the bounce back loan to refinance other business debts, to lower related interest costs.

Money loaned from the scheme cannot be put into a personal account to accrue interest. It is strictly to be used for business-related purposes. Using the bounce back loan for anything else could be seen as not “acting reasonably and responsibly”. If this is found to be the case, at any point, then the owner could personally be liable if the company ever enters either compulsory or voluntary liquidation.

  • What if you cannot pay back a business bounce back loan

Unless there is a crystal ball close to hand, knowing how long the current crises was going to last when the loan was taken out (even if you do it now, and in light of the Government end of lockdown roadmap – those quoted dates are not set in stone, remember, it is a best-case scenario only).

This means that the loan may have gotten you to this point but now the business is in trouble again. In this situation it could well be that the business simply will not be able to repay the loan, so what happens then?

If it ‘just’ the loan that your company is having trouble with, there isn’t too much to worry about. It has been reported elsewhere that the loan allows for ten years to repay, but this isn’t strictly true.

No payments are due for the first 12 months, and the loan itself is for 6 years (not 10, as misleadingly stated on other websites). However. Shortly before the first payment is due, your chosen lender may contact you with three options:

  • Extend the loan for an additional four years if you foresee payment issues.
  • An option to make interest-only payments for 6 months (this can be done a maximum of three times).
  • And an option to pause all payments for an extra 6 months on top of the original12, and this can only be done once.

While the above is true, if the inability to repay this loan is symptomatic of deeper cash-flow issues, and other debts are piling up, then you may have to look at other options such as:

  • HMRC time to pay arrangements
  • BBL (Business Bounce Back Loan) payment holidays

In more serious, dire situations then a restructure of company debts and costs by the way of an insolvency mechanism may well be required. If your company is no longer viable, in other words, can no longer function due to financial issues, then it must be placed into voluntary liquidation.

  • Can a bounce back loan be written off?

Because the loan was issued to the company, not an individual (even if you are the director and sole shareholder), then when the company ceases to exist due to insolvency the debt is written off.

However. You need to be aware that if you used the bounce back loan to repay any personal loans or debts, or paid business debts ‘preferentially’ because a business debt was to a friend, then this may well be reversed by a liquidator. What does this mean, if this happens? It means that you have not used the loan for the purpose in which it was issued and you may find that you become personally responsible for paying it back.

A liquidator could also decide to investigate exactly where the money went and could decide that the money was stolen, by you, from the company. This could be interpreted as asset misappropriation fraud, which is a criminal offence.

As well as possibly being disqualified from being a director of a company ever again, you are likely going to end up in an interview room with the police if asset misappropriation fraud is suspected.

In short, don’t use a bounce-back loan for anything other than its intended purpose. It just isn’t worth it.

  • To conclude

A Business Bounce Back loan can be a lifeline for businesses that genuinely need it, realistically expect to be able to pay it back and the loan is used for its intended purpose. If you do need the bounce back loan to help your business that has been adversely affected by the coronavirus pandemic, and you haven’t applied yet, then do so. You have until the 31st of March, 2021, to get the application in. Don’t delay any further.

Business Credit Reports, what do they contain?

  • UK business credit report what does it contain?

A business credit report is similar to a person’ credit score in that it is a score given to a company (in this case, rather than an individual) which determines how creditworthy the company is to potential partners, investors, suppliers and customers.

The credit report can be a strong indication of how well the company is doing, financially, because it is compiled from elements of the accounts of the business, such as:

  • Cash flow
  • Balance sheets

There are other elements too, but these are the main two factors taken into consideration. As with personal credit scores, there is a range of different elements that are looked at and taken into consideration.

Business credit reports are compiled on a prediction basis, using different algorithms from reference agency to reference agency – this is why the reports can sometimes differ depending on the credit reference agencies used.

A business’ credit score shows the likelihood of a business becoming bankrupt within the next 12 months. For instance a score of 0 means this eventuality is highly probable, while a score of 100 means it is very unlikely. In short, the higher the score the more stable the company is deemed to be.

  • What is shown on a business credit report?

Reports of this type contain detailed information regarding a particular business, whether it is your own or that of a company you are considering doing business with. These reports can give useful insight into what the financial situation is of the given company such as:

  • Details on who the director is
  • How the company pays its bills

Every business credit report will give the person requesting the information the name of the business, its registered address, company number, the date it was incorporated and a SIC description. The SIC description, essentially, states what sector the business is in – which is based on information held by Companies House.

If the business has a listed telephone number and/or a website then the business credit report will state this information too.

  • Key financial information

The important financial information of a business will also be shown on the credit report when the accounts are filed. ‘key financials’ include profit and loss, the balance sheet, business capital and reserves, cash-flow and other pertinent details.

As well as the above, there will also be rations stated like debtor and creditor days, profits before tax etc. All of this is taken into account when the score is being determined. That being said, all detail is there for the business or person that requested the report to dive deeper into, if they have an eye for numbers.

  • Negative financial detail

A business credit report in the UK is also going to show negative financial details, such as county court judgements (CCJs). If you are not sure, a CCJ happens when a company fails to pay an invoice and has been taken to court for the other company to have their debt paid.

How long a CCJ remains on a credit report is going to depend on how quickly the company that received it takes action. For instance, if a county court judgement is settled (either paid or disputed successfully) within 30 days, then it is removed from the credit report completely. Otherwise, it will remain on the report for 6 years.

  • Director information

A company credit report also details Director and Shareholder information. This information will include names, date of birth and address of every director and shareholder within the business. Also detailed will be their nationality and any links they may have with other businesses past and present – including directorship positions with failed companies.

Credit reports for business’ are, as you can see, highly detailed – and necessarily so – and they can help any business make the right decision when it comes to teaming up with customers, partners etc.

The Deadly Sins of Credit Management

There are two different ways of approaching credit management – the right way, and not the right way. The second of these approaches can damage your business irreparably, and so it is important to recognise just what the deadly sins of credit management are and how to avoid them.

  • Not knowing just who you are dealing with

Not knowing who the other person or company is can cause all manner of problems later on down the line. If the information that you have on the debtor is not complete, you could be chasing that debt indefinitely. This is especially true if you do not, for whatever reason, have the correct name on file. 

Failure to determine the correct details is not going to get you very far in court if you apply to have a CCJ filed against the debtor. A business credit report is going to help enormously in getting you the details that you need.

  • Inadequate or absent terms and conditions

There is an alarming amount of companies out there that have inadequate terms and conditions when it comes to invoices, lines of credit and payments. Even worse, some companies don’t have them at all. If you fall into either of these categories, it is probably not too late.

It is tempting to overlook details like this when things are going well, but making these changes now can save you a huge headache later.

  • Inadequate paperwork and administration

Getting paid on time, ever time is the ideal situation for any business to be in but let’s be perfectly honest, this is not likely to happen. This can be because you neglect to send invoices or you don’t keep up with things because of poor paperwork. There is also the risk that you may not be paid at all, let alone late.

Errors on the part of the company, that can mean you not getting paid on time, can include:

  • Entering customer details incorrectly on accounting records
  • Order numbers missing from invoices
  • No proof of delivery
  • Missing or unclear agreements on credit terms

Attention to detail is important, and a customer’s details may have changed since the last payment. It is always worth checking, just in case.

  • Believing the customer will pay because they have in the past

It cannot be assumed that a customer or partner is going to pay this time just because they paid the last time. ‘payment reminder’ are not dirty words, although it can feel awkward if the customer is particularly long-standing. It pays to remind yourself that this is business, not personal.

Building trust is extremely important in business, so do be polite in your communication but don’t be a pushover either. Don’t allow payment reminders to go ignored and you shouldn’t ignore red flags when you see them.

  • Are you irreplaceable?

If a customer needs to do business with you, rather another business, then they may not be inclined to let you know of their financial difficulties. Indeed, it may be that the first you know about it is the insolvency notice lands on your doormat.

Don’t allow things to get this far. Your customer may well be late paying others too to keep going in the hopes they can solve their financial woes. The Register of Outstanding Invoices can be an invaluable tool in discovering if a customer is defaulting elsewhere too – discovering this early can save you a lot of money.

  • Don’t take unnecessary risks

“a sale is not a sale until it is paid for” – truer words have never been spoken. Many businesses have to take calculated risks, that’s just the nature of doing business, but the keyword here is “calculated”. Whatever your business happens to be, you should base and chances you take on the potential for profit – there is little point in making a lot of sales if they don’t turn an actual profit.

  • Get to know your customer, properly.

This means before the sale, in the discussion and after the fact. Customer relationship management, right from the beginning, can help you to reduce potential write-offs. Businesses that survive the tough times, as well as thrive in the good ones, have solid processes in place.

A quick prospect check on a potential customer is going to save a lot of time. This means making sure that the potential customer is an actual fit for your company. If they don’t meet your requirements then there is little point in pursuing business with them.

If they do look ideal, however, then the sales team is going to be in a much better place to close a deal and open a properly formatted credit account application.

Business credit checks can help navigate most of the above and don’t forget to keep your records up to date.

Top Tips to get your invoices paid.

Despite the unprecedented times we are living in, bills, wages and overheard must be paid. Whether businesses are running or not, those invoices must be paid. While this is the plain truth, some people and organizations might be tempted exploit such situations.

For example, during this period of rampant lockdowns, most businesses would lag in paying rent simply because they closed. Here are seven top tips to ensure your invoice gets paid

  1. Be considerate and reasonable

Take a breath and think through the symbiotic relationship existing between you and your customers. Understand that most of your customers are likely to remain after a crisis is over. Therefore, it is prudent to keep them on side while taking care of the health and survival of your business. 

If dialogue cannot be achieved, then it is wise to put in place a toolkit to have your invoices paid. Unfortunately, you will have some people that will use the virus as an excuse to not pay their invoice on time, but not having patience may makes things worse.

  1. Consider electronic credit control

This is a period where many employees have been working from home. This being the case, it could be ineffective sending invoices and follow-up letters via the post since they may never be picked or maybe picked very late. 

If you want your payment to be processed during this work-from-home era, you must embrace electronic invoicing as well as credit control mechanisms where possible. These processes ensure instant message delivery and it is a guarantee that your employer will receive the invoice.

  1. Consider advance payments

If you had trouble with late invoice payments before, or the expected invoice amount is expected to be considerable, then getting payments in advance could be the way to go. This method works quite well for businesses with high value products and services. At the very least, consider taking deposits – around 30% or perhaps enough to cover actual cost, at least that way you break even.

  1. Impose interest charges on late payments

If an invoice has interest payments past the due date, most people are careful not to miss payment deadlines. Check if you could include interest charges to encourage timely payments from your customers. 

Otherwise, you can use the Late Payment of Commercial Debts Act as it applies to B2B contracts. This provides at least 8% a year interest on the price of goods or services, plus a fixed sum and reasonable cost of recovering the debt.

  1. Ask your customer for security

You can take security should you doubt the customer’s ability to make payment, and you cannot get an upfront payment form them. The security could be a floating, personal guarantee or a fixed charge. If you consider a personal guarantee, it is important to have them documented correctly to avoid future conflicts. It is also key to ensure that the security is saleable, valuable and will retain its value.

If your business sells merchandise, it is advisable to retain ownership pending payment. When the customer fails or delays to pay, consider having a legal document which permits you to repossess the goods or hold a property which belongs to the customer until the payment is done. You can also threaten to repossess your goods should the customer fail to pay.

  1. Prioritise Customers

If you foresee possible cash-flow problems, identify customers who have a tendency of making timely payments and work for them. Make your customers understand that advance payments will be prioritised during times of high demand and extra fees will be charged for express services. This concept has been in for some time and customers are used to it.

  1. Take legal action

This should, of course, be the last option and should only be taken when the customer continually refuses to pay, ignores dialogue etc. If you escalate the matter to the court. There are legal procedures which can be used to make payment fast and also protect you and your business from loses.  

Having invoices paid in a timely manner is obviously important, not least to maintain your cash-flow.

The late payment legislation what is it? and how can it be used to get my invoices paid

There are two purposes for the creation of the Late Payment of Commercial Debts Act 1998 (also known as the late payment legislation). The first purpose is to compensate creditors where their debts are late being paid.

It also serves to deter late payments. Also, as the official name of the Act suggests, it is only applicable to the commercial supply of services and goods where there is no provision for interest in your Terms of Business.

In short, for those invoices that have not been paid on time, the legislation allows businesses to claim compensation and interest. Furthermore, if orders were placed with you after March 16th, 2013, then you can also claim for reasonable costs incurred in attempting to collect the debt where these figures exceed the compensation.

  • How much interest can you claim and from when?

Businesses can claim interest at 8% over the Bank of England base rate, along with due compensation at the rate of £40 to £100 per invoice. Assuming there is an agreed credit period, then interest is payable from the end of this period.

However, if no agreed credit period is in place then the interest is payable 30 days from whichever is later:

  • The date goods or services were supplied, or
  • The date your customer was told the invoice amount is due.
  • The conclusion of any procedure for ensuring that the supplied goods or services are as per the contract – this procedure itself cannot exceed more than 30 days.

If your business happens to supply a public authority then interest charges are payable after 30 days, regardless if a longer period was agreed or not.

Where a clause exists in your Terms of Business, relating to late payment interest, then you have to charge this interest in accordance with the amount stated in your Terms of Business. Further, you have up to 6 years claim the interest.

  • Supplying other businesses

If your company supplies other businesses, whatever their sector, then interest will usually be payable after 60 days – even if a longer due date had already been agreed. The only instance where this differs is if a situation arises where a credit period that exceeds 60 days agreed – however this is only allowed if it is not considered grossly unfair to ‘your’ business.

There are also instances where you would not be entitled to costs, compensation or interest payments. One such instance is where your Terms of Business already provide for these on unpaid invoices.

To avoid the above exclusion, businesses would be wise to change their Terms of Business and rely on the Late Payment of Commercial Debts Act instead. If you do this, you should ensure that your customers know, by:

  • Update all documents, such as invoices, where your Terms and Conditions appear
  • Provide your customers with the revised Terms and Conditions
  • Let your customers know when the revisions come into effect
  • Keep copies of communication so you can prove that your customers have been informed about the change

It should be noted at this point that your existing contracts will still be governed by the Terms and Conditions that were in place the time they were entered into.

  • Final thought

On occasion, the T&Cs may form a part of the contract and provide a comparatively low rate of interest where overdue payments are concerned. If this happens to be the case, a court may decide that the interest rate set out is not high enough and the legislation should apply.

Should that be the case, you will be able to claim compensation, costs and interest under the Act/Legislation and not the lower amounts stated in the contract.

Are customers using the pandemic as an excuse to not pay?

You will have heard this a hundred times by now, but we are living in unprecedented times at the moment. The pandemic is a global crisis and it has far-reaching consequences, as many business owners will already no doubt realise. Families, communities and society as a whole – we are all feeling it.

Some of us will be impacted more than others, naturally, and there will be cases where individuals and businesses alike will be seriously affected by this disease. What this means is that an amount of forbearance should be practised – this is where we all need to come together and help, not pull apart and ignore.

That being said, overheads and wages still need to be paid, whether businesses can trade or not. Of course, this also includes the fact that provided goods and services will need to be paid for too.

Our news channels are full of stories of empathy, support and general human kindness, but business owners will know there is a different untold story. 

There will always be that element that will look to take advantage of situations, such as the one we currently find ourselves in and use them to not pay debts. Being paid for hard work is, after all, just as much about fairness as it is about, law, contracts and agreements.

The pandemic is not always a valid reason for late payment

There are many industries where the virus ground caused them to come to a grinding halt. Sectors such as activity centres, restaurants, pubs, tourism have all had a bad time but there are also areas such as dental offices.

So, yes, many business sectors have been greatly affected and shut down – with some businesses facing permanent closure. However. It is important to remember that many businesses can still operate pretty much as normal. It is these businesses that you don’t expect to pull the ‘Corona card’ when claiming they cannot pay invoices, but many are.

While forbearance is important, some business customers are just hiding behind the virus as a reason for non-payment.

Bearing that in mind, and if your customers are one of the types that can continue to operate regardless of Coronavirus, then you need invoices paid. But if they are hiding behind the pandemic and using it as an excuse to avoid paying, what can you do?

Keep lines of communication current and open

Making sure that your invoices are paid during challenging times requires a little care – whether claims of being unable to pay are false or not. Keeping communication lines open can often avoid disputes and, importantly, an outright refusal to pay any invoice at all.

Keeping things polite and professional always helps, as does requiring deposits before any work starts or even the whole sum if it isn’t too much. Timely invoice reminders kept polite, should also be given.

Of course, keeping lines open can also help you determine if a debtor is genuinely having financial issues or not.

Review your options if invoices remain unpaid

It is worth remembering that most genuine debtors are more than willing to work with you to reach a constructive agreement. That said, sometimes stronger action is sometimes required – particularly if you suspect them of just using the Coronavirus pandemic as an excuse, as many in certain industries are – you have to protect your cash flow, after all.

Options open to you could include:

LBA – Letter Before Action. Don’t be put off by asking a debt recovery agent to send a Letter Before Action. It is a strong signal of intent that many companies will not ignore, and they can often lead to an outcome on their own.

Debt Recovery Claim – if the company doesn’t respond to an LBA, or fails to pay, then getting claims proceedings started is the next logical step.

Debt Recovery Enforcement – While enforcement agents are not currently permitted to attend residential properties, they can visit business premises to recover debts or goods to cover debts.

The debt recovery enforcement stage would only be possible if the business is still open. Of course, if they are using the pandemic as an excuse then they most likely will be at the business premises. 

To conclude

While many businesses are legitimately facing financial challenges of their own, and most can be dealt with ‘softly-softly’, there are a lot that is simply not. You deserve to be paid for your hard work, and using a pandemic as an escape clause should not be an option for these businesses.

Are credit reports still viable for identifying risks to my business?

Sometimes it can be hard to know if a potential customer is a good or bad credit risk. All businesses need to safeguard their finances from potentially risky customers. You can keep on top of your credit risk management by obtaining credit reports.

Credit reports are an excellent way to help you decide whether you should offer credit services (buy now, pay later) to any customer. To further help protect your business finances, you are also able to see if potential suppliers are partners have any issues that could affect your business.

The importance of reducing credit risk for your business

Trade credit is essentially an agreement between you and your customer that says the customer can purchase services, or goods, from you and they will be able to pay for these at a later date.

These agreements are perfectly normal with transactions between other businesses, and they are highly effective in encouraging sales and stimulating growth for your business.

Of course, there is a catch to all of this. Any time that a business invoices customers after services or products have already been provided, it exposes itself to financial risk; customers may pay late, or even not at all.

Late payments and defaults can hamper the cash flow of your business, so you need to be able to check the reliability of a customer first. Identifying a future customer’s credit rating, or worthiness is a highly effective method of reducing your financial risk.

Review a business credit report

Business credit reports have long been a viable tool in helping risks to your business, and, likely, they always will be. A credit report can outline the ability of a given business to pay their invoices. These reports are based on:

  • Payment history
  • Public records
  • Annual sales
  • Invoice activity
  • Credit limits
  • Any legal judgements
  • Debt recovery activities
  • Overall credit score

The report can be quite extensive and the overall credit score is a measure of the business’s overall financial stability. It can also be used to predict just how likely a company is to pay your invoices, and on time.

It should be remembered, however, that credit reports are based on details from a snapshot in time, which is not always immediately obvious to the reader. Any company using credit reports need to be aware that the information could be several months old, perhaps even up to as much as a year.

Because these snapshots could be a little dated, due diligence in obtaining reports from several services may be necessary. Does this make credit reports any less important for your financial security? Not by any means, because used correctly they can be very helpful in determining creditworthiness and can help negate the need for a debt recovery service in the future.

What is a debt-to-income ratio?

Another excellent way to determine the creditworthiness of a company is to use the company’s financial statement as well as a credit report. To ascertain the debt-to-income ratio of the business. Nearly all businesses have ‘debt’ of some kind, whether it is trade credit or anything else. The debt-to-income ratio is a calculation of what portion of any debt, in total, make up the total earnings.

The calculation itself is quite simple; all you need to do is divide monthly debt payments by gross monthly income then multiply by 100. Of course, the lower the number that you come to, the better – ideally below 36.

To conclude

Business credit reports are always going to be useful, as are financial reports (businesses looking for credit with you should have no issues in providing one), in managing the risks to your business.

Used correctly, credit reports could be the difference between you taking on bad credit and establishing flourishing relationships with new customers.

Instruct us now.