So you have supplied a business or company and now they will not settle their account despite your best efforts to get them to pay up. You have sent statements, reminders and maybe even letters threatening formal debt collection action; you have sent more emails, made more telephone calls and left more messages than you care to remember. You have been completely ignored or given one excuse after another and the invoices remain unpaid. You just want to be paid for the goods or services your business delivered, yet you are left feeling frustrated and angry and not sure what to do next.
Unfortunately this a scenario familiar to businesses of all sizes in all industries across the UK and whether you are a self-employed contractor, work in the accounts office of a small business or head the credit control department of a large national company you will know just how time consuming and exasperating chasing unpaid invoices can be. It also costs money, if your self-employed the time spent on chasing customers for payment could be better spent on what you do best, working and making money, if you employ staff who spend time chasing up payment of overdue invoices, that time is costing money and should be being used in other areas to improve and grow your business.
Why won’t they just pay?
They could be waiting to get paid themselves, they could be using credit to fund the growth of their business by taking on extra staff and buying new equipment while delaying payment to suppliers, your invoices could just be held up in their chaotic payment system or the business could be in financial difficulty! If you have even the slightest inclination that a business or company that has not settled your invoices on time has financial problems you should take action immediately.
Over 250,000 businesses in the UK close each year, that’s almost 700 a week. While some of these businesses choose to close and pay their creditors before doing so, the vast majority are insolvent and are forced to close usually leaving behind a string of unpaid creditors. Quite often the business that owes you money will have been trading successfully and profitably for many years and had always paid its suppliers on time building up a good credit history in the process, and then their biggest customer enters administration owing them tens of £1,000’s and their turnover is reduced by 20% eventually forcing them out of business too. You had no idea this was going on and gave them more time to pay as they were a good customer over the years and always paid; now they have been forced out of business and your company has lost £1,000’s. This is just one example of the many circumstances that can lead to well-run profitable business finding itself unable to pay its suppliers.
So you have decided to take action, it’s not worth taking the risk of waiting any longer, and you are simply fed up with hearing excuses, but you are still not sure what is the best course of action.
What are the debt collection options available to you?
There are basically four routes you can take to try and recover the money your business is owed, you could instruct a solicitor that specialises in debt recovery, you could go it alone and issue a claim in Court, you could use the services of a debt collection agency, or you could take advantage of Advocate’s free debt recovery and collection service. Let’s take a look at the options in more detail:
1. Instruct Advocate to recover and pay to you 100% of the money you are owed
Advocate deliver a professional, effective debt recovery and collection service on a no cost to the creditor basis, there is no charge, commission or fee to be paid by the creditor. We will claim our costs from the debtor by adding late payment charges in accordance with current late payment legislation to the total to be collected. In over 80% of cases we successfully recover and collect the principal debt and late payment charges within 14 days and prior to any form of legal action.
We specialise in recovering payment of unpaid business to business invoices, we do not accept any other type of debt collection cases and that’s why we are the industry leaders in what we do. We only deal with businesses, both creditor and debtor businesses, we know how business works, we know how businesses in financial difficulty work, we know they have no choice but to prioritise who they pay and who they don’t pay and we know how to ensure your invoices are prioritised and get paid.
Late payment legislation was introduced to help prevent businesses suffering from the cash flow problems caused by late payment. If your business supplies its goods or services to another business, no matter the size of your enterprise or the industry you work in, you have a statutory right to be paid within 30 days of delivery. If you are not paid within 30 days you are legally entitled to instruct a third party to assist and recover payment of the outstanding account and claim the costs involved in doing so from the debtor. Advocate take care of the whole process, recovering and collecting the money due to you, applying and collecting the late payment charges and then forwarding to you 100% of the principal amount owed to you via a same day bank transfer. All we require to start the collection process is completed account referral form and a copy of the overdue invoice(s), you can even supply this information online in just a few minutes: Submit a Debt
Advocate’s success rate is unrivalled in our industry, yet in a small percentage of cases it is simply impossible, even for us, to recover a debt. If the business is already insolvent and they do not have the money to pay their creditors or any assets that could be realised, the likelihood is that the company will enter administration and be liquidated. It’s important to assess a debtor’s future trading ability before commencing any type of collection activity or legal action. You could end up increasing your loses by instructing a solicitor and paying expensive fees only to find out the debt is unrecoverable, equally you could pay a hefty Court fee to issue a claim in Court and even be successful in obtaining a Judgment only to find that by the time the verdict is delivered the defendant has ceased to trade.
As part of Advocate’s recovery and collection procedures we compile information and data on the debtor’s past trading and payment history, the ability of the business to continue to trade including the current performance of the industry the business operates in, the business history of the owners or directors including any recent new company registrations and the assets of the business including stock and the sales ledger. If after 14 days we have been unsuccessful in recovering a debt there will be a very good reason for the failure to collect and it’s usually because the business is insolvent. While you will have no real choice other than to write off the debt you can be assured that everything possible has been done to try and recover the debt and you will not have lost any further money on solicitors’ fees or Court costs. The debt collection and recovery services provided by Advocate are completely free of charge to the creditor, only when your debt is repaid do we receive payment from the debtor.
2. Instructing a solicitor
Large practices often have dedicated debt recovery departments, smaller practices may have a single debt specialist, while some firms specialise completely in debt collection and even small firms that specialise in other areas will gladly take on a debt recovery case for an existing client. Some solicitors, especially recovery specialists can be very effective in collecting the money your business is owed, particularly in disputed cases that are likely to proceed to Court. The concern that many claimants have about a using a solicitor to collect a debt is that there is simply no incentive for a solicitor to investigate and research a business to ensure it has the means to pay should a judgment be obtained against it. If a company or business is insolvent and has no assets it is very unlikely that a Judgment obtained in Court would ever be paid, you would have been better advised to write off the debt and save on the Court and solicitors fees.
The traditional debt recovery solicitors described above have faced increased completion in recent years from online solicitors offering dedicated collection services at low prices. You may have seen such firms offering to issue letters before action for as low as £2.00 and while this may sound attractive, the truth is these letters simply do not work, and there is a very good reason for that. If you think about it is impossible to make a profit by charging £2.00 to prepare and send a letter, if the letters did work these firms would soon be out of business, but they are not, they are actually thriving because the letters do not work. They are structured in such a way as to be no more than a notice of the amount outstanding there is no warning of the consequences of non-payment or any threat of legal action, they are about as effective as sending a monthly statement. And when the letters don’t work and you don’t get paid, you are informed by the online solicitors that the only course of action remaining is to issue a Court claim, and this how they make their money. You will find that the fees charged by online solicitors to issue claims in Court and represent in defended cases are amongst the highest in the legal industry.
3. Issuing a Court claim
You can issue a money claim in Court without the need to instruct a solicitor by using HM Courts internet service (MCOL). You can only issue a claim to be served on a business or company located in England or Wales and up to a fixed amount of £100,000. Cases that are heavily disputed or highly complex are not suitable to be issued using MCOL. To issue a claim online, you will need a correspondence address in the United Kingdom, an email address and the ability to make a card payment to pay the Court fee.
The Court will expect you to have taken reasonable measures to settle the dispute before you start to issue the claim. This usually includes writing to the defendant and explaining your position in enough detail to allow them to respond. In debt collection cases, you may have already sent letters before action detailing the debt and timescales which would be deemed as acceptable pre-action conduct.
The process of issuing a claim is completed in five steps:
1. Enter your organisation’s details as the claimant
2. Enter the details of the defendant, the organisation that owes you money
3. Enter the claim particulars. This where you can explain the circumstances on how the debt is made up and what steps you have taken to recover the debt along with and details about the defendant’s response to your actions. This section is limited to 1080 characters, so if the details are complex you can request to send detailed particulars to the defendant separately.
In this section you can also choose to add interest which is charged at 8%. You will need to calculate the interest amount and add it to the total amount before entering the figure in the amount to be claimed box.
4. In this section you will be prompted to confirm that the details you have entered are true and correct to the best of your knowledge, that you have read the MCOL guidance and fully understand the process about to be commenced.
5. In the final section you must enter your payment details to pay the Court fee. The fee will be dependent on the amount of your claim:
Up to £300 £25
Up to £500 £35
Up to £1,000 £60
Up to £1,500 £70
Up to £3,000 £105
Up to £5,000 £185
Up to £10,000 £410
Up to £100,000 4.5% of the claim value
The fee paid will be added to the amount claimed from the defendant.
The claim will be issued in 7 – 14 days from the submission date and once served the defendant will have 14 days to enter a response. The responses available are:
Acknowledgment – this indicates the defendant will be defending the case and increases the time available to do so to 28 days.
Paid Defence – the defendant says the debt has been paid prior to the claim being issued. You will be asked if you wish to continue with the claim.
Full Defence – the defendant disputes the total amount claimed. You will be asked if you wish to continue with the claim.
Counterclaim – the defendant disputes the total amount claimed and intends to issue a claim against your organisation. You will be asked if you wish to continue with the claim. If you choose to withdraw, the case may continue on the basis of the counterclaim only.
Part Admission – the defendant intends to pay part of the claim and dispute part of the claim.
Full Admission – the defendant intends to pay the total claim.
While the process of issuing a claim online is fairly straightforward and the vast majority of cases are undefended leading to a successful Judgment, the number of Judgments that are actually paid are only 55% of the total Judgments awarded. So obtaining a Judgment is far from a guarantee that you will receive payment and is often just the start of a lengthy enforcement process. It is widely regarded that online claims do not carry the same urgency and impact of a claim presented by a legal professional and issued in the Count Court.
4. Debt Collection Agency
Traditional agencies have a fairly bad reputation and its easy to see why. While tighter regulation has put a stop many of the bully boy tactics and sometimes thuggery once employed by many agencies, some still use unscrupulous, although legal means to deceive clients. You should think twice if an agency asks you to any upfront fees or membership fees, any reputable collection agency will offer no win no fee terms.
An agency asking you to pay a membership fee of up to £995 in some cases will simply take your money and doing nothing in return, why would they have already earned their money, there business model is all about getting new clients to sign and pay a membership fee. If they do even bother to go after a debt the work they carry out will be minimal and consist of sending a couple of letters at most.
You should always ask for references and to speak with previous clients and ensure the agency is a member of the industries governing body the Credit Services Association. Fees can range from 5% to 25% and are often based on several factors such as the age of the debt, so always get the exact fee in writing before agreeing to an instruction.
There are many good agencies who are well regulated and have very good success rates, its worth taking the time and doing some research to make sure you find one and don’t fall into the hands of an agency which has been set just to get you to part with your money, insisting on a no recovery no fee agreement is a good starting point.
If you are looking for a risk free, cost free debt collection service that includes totally honest advice, professionalism and integrity while offering unrivalled rates of success, contact Advocate now!