Debt Recovery Process
The most crucial step in the debt recovery process is making the decision to start the debt recovery process.
In most of the debt recovery instructions we receive, the reason for late payment is that the debtor has a cash flow problem. The business does not have enough money to pay all of its invoices as and when they become due for payment. The directors or owners of the business will be prioritising who they pay next based on how important the creditor is to them in trading through the cash flow problem and which creditors take decisive action to recover payment.
Regular suppliers are often drip-fed smaller amounts than are overdue to keep them supplying their goods or services. The problem with this is that the total they are owed continues to grow. If they refuse and place the account on stop, the cash-strapped business will open a new account with another supplier who is unaware of their financial difficulty.
If you are not a regular supplier and do not expect to trade with the business again, you should also not expect to get paid anytime soon. You will be at the back of the line for payment.
Any creditor who continues to request payment politely and is satisfied receiving excuses and promises of payment that never materialise will be getting further away from payment, not closer.
The longer your invoices go unpaid, the higher the risk that the debtor will fold and the invoices will never be paid.
Getting Your Invoices to the Front of the Line
Advocate’s debt recovery process is all about getting your invoices paid as quickly as possible by ensuring they are at the front of the line for payment and will be paid next. Once you instruct us, your debtor will, in no uncertain terms, be made to understand that you are serious and you will no longer tolerate any further excuses or delays in payment.
Even the most unresponsive debtor will have no option but to respond to intended legal proceedings once they are put on Notice by Advocate. Our persistence and determination in making clear the severe consequences of non-payment and our experience in dealing with even the most elaborate and robust excuses are just some of the reasons why we successfully recover full payment in over 80% of the debt recovery instructions we receive.
In the few cases where we cannot recover payment, it will usually be because the creditor left it too late to instruct us. Remember the line for payment and how important it is to quickly get to the front by taking debt recovery action.
Instructing Us
It’s easy and takes just a few minutes, and once you have instructed us, there’s nothing more you need to do.
Simply complete Advocate’s online instruction form. Enter your contact details and the debtor’s contact details, including as many contact names, email addresses and telephone numbers as you have. Then, a brief description of the goods or services supplied to the debtor. Finally, let us know about any action you have taken so far and any response. If there is anything else we require, we will find it!
Once the form has been completed, you can upload a copy of the unpaid invoices. That’s all we need to get started! If there is anything else that you think may help us, like a copy of an agreement or contract, purchase order or email correspondence, you can upload it at the same time.
When you’re ready, click on the submit button, and we will receive your instruction immediately.
If you instruct us before 14.00, we will commence action the same day and send you a confirmation email. If you instruct us later than 14.00, we may not have time to commence the action until the following morning, when you will receive a confirmation email from us.
What Happens Next
The most appropriate course of action is determined by analysing the debtor’s financial and credit profile:
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- Do the debtor’s latest accounts indicate that they could settle the debt?
- What assets are there?
- Could those assets be quickly realised?
- Is debt recovery or Court action being taken by other creditors?
- Has the debtor had any County Court Judgments registered against it?
- If so, do they remain unpaid, or have they been satisfied?
- What loans and financial commitments does the debtor have?
- Are their financial commitments in default?
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We utilise the latest debt recovery software and real-time financial information to answer all of the above questions and more in just a few minutes.
In most cases, the threat of Court action from Advocate Commercial Debt Recovery will result in payment. In some circumstances, and usually, when unsatisfied County Court Judgments are registered against the debtor, Insolvency proceedings and the threat of a Winding-up Petition will be more appropriate and more effective.
Dedicated Case Manager
As soon as we have commenced action, you will receive an email confirmation from your dedicated case manager. They will provide you with a unique case reference number and outline the steps they will be taking. Your case manager will remain your point of contact throughout the process, and they will update you immediately on any progress.
Notice of Legal Proceedings
On day one of our action, we issue the debtor with a Pre-Action Protocol compliant Notice of Legal Proceedings. The Notice demands payment within seven days and explains the severe consequences of non-payment and the intended legal proceedings.
The Notice includes the late payment charges that make up Advocate’s fee and allows us to provide our clients with a completely free debt recovery service.
As a legal requirement for a limited company, the Notice is issued to the address registered at Companies House. If different, a copy will also be sent to the trading address. If the debtor is a sole trader, the Notice can be sent to the trading and home addresses.
The Notice advises the debtor Advocate Commercial Debt Recovery is instructed to deal with the matter on behalf of our client and that any contact or correspondence, for whatever reason, must be directed to us and not our client.
Contacting The Debtor by Email
On day two of our action, we will send a copy of the Notice by email. Please supply us with as many email addresses as you may have. We will also endeavour to obtain the company directors’ email addresses. The more people within the company that have sight of the Notice, the more quickly the debt will be settled.
Contacting The Debtor By Telephone
Telephone contact commences on day three of our action. The conversation is professionally structured to educate the debtor on the consequences of continuing to withhold payment and, at the same time, eliminate any excuses and barriers to payment.
Telephone contact with the debtor is essential in correctly identifying and resolving cases where a genuine dispute exists and cases where the debtor genuinely cannot pay the entire debt immediately. A payment plan (subject to the client’s approval) could be a more cost and time-effective alternative to legal action.
Direct Payment from the Debtor
Upon receiving the Notice of Legal Proceedings, many debtors accept the fact that they can no longer ignore the debt and it must be paid.
Some debtors will arrange immediate payment. It is not unusual for us to recover full payment and transfer the funds to our client within 24 hours of commencing action.
In an attempt to evade payment of the late payment charges that make up our fee, some debtors will arrange immediate direct payment to our client of the invoice sums only. We would then continue to pursue the debtor for payment of the late payment charges, which is our fee. All we ask in these circumstances is that our client notifies us as soon as possible that they have received payment.
Direct Contact from the Debtor
Upon receiving the Notice of Legal Proceedings, some debtors (despite our instruction not to) will contact the creditor directly. It is important that the creditor does not discuss the matter with the debtor. Entering into dialogue with the debtor after Advocate has been instructed allows the debtor an opportunity to continue in their behaviour to delay or evade payment. The urgency and gravity created by our action would be diluted, reducing our ability to recover payment.
Our advice to clients who are contacted directly by the debtor is to advise them that you are not prepared to discuss the matter; it is out of your hands, and they must contact Adocate.
When We Recover Payment
100% of the invoice sums are transferred to the creditor the same day via a faster payment. No fees, charges or commission are payable by our clients. The debtor pays the late payment charges that make up our fee.
We notify clients as soon as payment has been transferred to their bank account. Typically, this will be within two hours of us receiving the payment. It will always be the same day we receive the payment.
Dealing with Disputes
Should the debtor raise a dispute, we would demand to be supplied with documentary evidence to substantiate that a genuine dispute exists and proof that the creditor has previously been notified of the dispute.
If the debtor can evidence that a genuine dispute exists, the evidence would be presented to and discussed with the client before taking their further instructions. If the dispute is genuine, we can work with both the creditor and the debtor to reach an amicable settlement.
If the debtor cannot provide evidence to substantiate that a genuine dispute exists or that they notified the creditor before the invoices became overdue for payment, we would consider the dispute spurious and continue in our action.
When instructing us, you must supply us with the details on any dispute or query previously raised by the debtor, whether you consider it genuine or not.
Payment Plans
We will always demand and endeavour to recover full and immediate payment of a debt. However, if the debtor does not have the money to pay immediately and in full, and if we have verified that they do not have the money to pay. Issuing legal proceedings may not be the best way forward. There are costs involved in taking legal action, and those costs could increase your losses if the debtor business folded.
If our client was minded to accept a payment plan, we would negotiate with the debtor to ensure that the agreement was favourable to our client. In most cases, we would not recommend that our client accept any proposal that extends beyond three months or does not include an immediate part payment.
If an agreement is reached, we will administer the payment plan and contact the debtor before each instalment is due to ensure the agreement is adhered to.
Final Demand Notice
This is the halfway stage in our debt recovery process. By now, around 60% of debts will have already been paid by the debtor, many within the first few days of our action.
The 7-day Notice of Legal Proceedings has expired, and as advised in the Notice, a 7-day Final Demand Notice will follow to complete the 14-day Pre-Action Protocol procedures. Again, copies are sent by email, and further telephone contact is made to ensure the debtor is aware of the consequences of the intended legal proceedings.
Of the remaining cases, over 50% will be paid before the Final Demand Notice expires. Some debtors, for whatever reason, will wait until the final day of the debt recovery process before they pay. Advocate Commercial Debt Recovery’s average pre-legal success rate last year was 84%.
Debt Recovery Legal Action
In the few cases where the debtor has ignored our action or refused to settle the debt, the next course of action is usually to go ahead and issue legal proceedings against the debtor.
We supply the creditor with a recommendation based on the information compiled during our 14-day debt recovery process. The recommendation would include our opinion on whether taking legal action would result in payment and details on the total costs involved in taking the recommended action. If we believe that issuing legal proceedings against the debtor would not result in payment, we will advise you accordingly. We would never advise a client to incur legal costs to pursue a debtor who cannot pay.
If it is likely that legal action will result in payment and the client decides to go ahead, our file will be transferred to our partner solicitors, Askews Legal LLP, with your instructions. Askews Legal specialises in debt claims and is a member of the County Court Business Centre, where it can typically issue claims within 48 hours. We will remain your point of contact throughout the process and report to you.
If the client decides not to issue legal proceedings, for whatever reason or if we recommend that they do not issue legal proceedings. The work undertaken by Advocate will be entirely free of charge.