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Top Tips to Successful Debt Collection

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In an industry which relies heavily on supply chain and excellent customer relations, having to deal with overdue invoices, repeated late and non-payments can not only affect immediate cash flow but the opportunity for repeat business and client referral. In the event that an account moves into dispute having the time and right approach to work towards a resolution without damaging customer relationships or causing negative impact to your projects can be a never-ending cycle.

Emma Miller, Company Director of Top Service answers some of your frequently asked questions to help you achieve success in collecting those overdue payments:

How can we improve the success rate of our debt collection process?

Ideally for the best chance of collection a debt should be no longer than four weeks overdue before passing to a third party. At Top Service we would suggest no more then three letters are sent in-house. If they haven’t responded then they are most likely ignoring you and it will be prudent to refer swiftly into the next stage of your collection process.

Know your rights when it comes to claiming interest. Whether it is contractual interest or statutory interest, you are entitled to it. If you are unsure about what interest and other charges you are entitled to contact us for FREE advice.

Can we pass the debt collection cost onto our customer? 

Yes, for commercial debts you can claim interest, compensation and costs of using third party collectors when applying the statutory legislation for late payment.

Under the Late Payment of Commercial Debts (Interest) Act 1998 you can claim interest at a rate of 8% above base rate and a compensation figure, depending on the value of the debt you are collecting:

Amount of debtWhat you can charge
up to £999.99£40
£1,000 to £9,999.99£70
£10,000 or more£100

If your collection costs are more than the compensation figure you are claiming, you can claim the surplus under the late Payment of Commercial Debts regulations 2013.

Winning a legal battle in court –  does this mean the opposing side pays our costs?

Judges in the County Court have discretion in relation to costs and can make a costs order if they feel it is appropriate whilst taking into account the value of the claim, the successful party and the conduct of the parties during the litigation process. However, generally the recovery of legal costs depends on the track your case has been allocated to. If your claim is allocated to the small claims track then usually costs are not awarded and each party pays their own. However, a judge in the small claims court may decide to award costs & Part 27 of the Civil Procedure Rules outlines the maximum costs which a judge can order a party to pay. Where cases have been allocated to the Fastrack, normally the successful party is able to recover their costs on a fixed scale from the losing party. The amount awarded and whether an award is made at all is decided by the Judge. The costs limits that apply to small claims and fast track cases do not usually apply to cases in the Multi-track. The losing party will generally be ordered to pay the costs of the winning party where the costs are reasonable and proportionate.

If we have credit insurance do we still need credit information & recovery services?

Yes, with your policy you will have discretionary limits which a limit you can trade up to without the formal approval of the insurer. If you need to make a successful claim you will need demonstrate you have carried out credit checks and other due diligence to mitigate any risk of trading. When an account becomes overdue you will also need to demonstrate you have taken relevant collection steps and effective litigation to collect your money, this process needs to meet the requirements of your credit insurance policy.

With credit insurance premiums being so high it is likely you have smaller customers that you decide not to insure. It is important you don’t forget about the importance of credit management for your un-insured accounts and make good use of your credit information and collections services.