Success Where Factoring Failed

Advocate Debt Recovery successfully recovered a debt of £8K after the client’s factoring company was unsuccessful. Factoring is a tool used by businesses to get prompt or immediate payment of invoices by selling them at a discounted rate to a third party. The factoring company takes responsibility for debt collection. The discount rate is typically in the region of 10-20%. For example, if you factored an invoice for £100 you would expect to receive £80-£90 of it. At Advocate no fees, charges or commission are payable by the client because we claim statutory late payment charges from the debtor to cover our costs. Clients receive 100% of the amount owed rather than 80-90%. Our client, in this case, hires out high-level access machinery to the construction and facility management industries. They have been trading for under 2 years. To help provide cash flow during their foundation years, our client makes use of factoring.

Raising Expectations

The debtor had recently finished ventilation upgrades to more than 10 sites owned by a supermarket chain. They hired scissor lifts and booms from our client during the upgrades. Advocate were instructed to recover 20 invoices, of which 13 totalling £3K were already overdue and 7 invoices totalling £5K would fall due within 7 days. Given the age of the debt (up to 137 days overdue), all factored invoices were reassigned back to the client, who then instructed Advocate. Unbeknown to the client, the debtor had raised reconciliation and allocation disputes which the factoring company had been unable to resolve.

Once instructed Advocate issued a 7 day Notice of Court Proceedings. It warned that upon expiry without full payment, additional statutory charges and recovery costs would be incurred through a Final Demand. Upon making contact, it emerged the principle sum did not reconcile with the debtor’s ledger. Evidence was provided showing a small payment had been made to the factoring company but not showing on the ledger. Having reviewed this with the client, they were able to confirm receipt from the factoring company. The statutory late payment charges were then revised, and Advocate took the chase back to the debtor. Next, there were allocation disputes involving credit notes that required unmatching from their corresponding invoices. The client was willing to reallocate credit notes as this had no impact on the principal sum. Advocate took the chase back to the debtor. Next, the debtor claimed not to have received several invoices, even though our client issues them by post and email. They also send out regular statements. It took the debtor over 100 days to first identify missing invoices. With copy invoices in hand, Advocate took the chase back to the debtor.

Break Through

On day 6 of our instruction, the debtor made a payment of £3K for the 13 invoices directly to the factoring company to who the debt was no longer assigned. We advised the client, who promptly confirmed the payment. The debtor was eager to avoid a Final Demand being issued on day 7 for the 7 invoices now falling due, totalling £5K. Before the close of business on day 6, the £5K was received and forward on by Advocate. The statutory charges were also paid, and our file closed with all overdue invoices now successfully recovered. Our client made a commercial decision to decline further trade with the debtor. Several weeks after closing the file, the client posthumously informed us payment of the remaining 17 ledger invoices had been received on the days they became overdue. Cases like this where the debtor is motivated into future good behaviour are not uncommon…you could say Advocate is an antidote for the slow poison of late payment!