The construction industry is always vulnerable in times of economic crisis and features high in the table of statistics for insolvency.  However, new statistics on company and individual insolvencies in England and Wales for September have been released (14 Oct 2020) and the overall number of insolvencies is reported to be low in September 2020 in comparison to the same month in 2019 (Insolvency Service Main messages for England & Wales (14 Oct 2020).

The overall reduction in company insolvencies was likely to be in part driven by the range of government support put in place to financially support to companies in response to the coronavirus (COVID 19) pandemic. The government also announced in late April that it would temporarily prohibit the use of statutory demands and certain winding-up petitions from 27 April to 30 June 2020 under the Corporate Insolvency and Governance Act 2020. This was later extended to 30 September, and last month was further extended to 31 December 2020 (extract Insolvency Service England & Wales)

The true picture of the impact of company and individual insolvencies to the construction industry is likely not to be fully understood until the 12 months ending 2021 as the nation fluctuates between local and national lock down measures. Statistics released by the Registry Trust are a good indicator of the economy, however the construction industry contributes seven percent of the economy and received the highest number of insolvencies by sectorin the 12 months ending Q4 2019, the construction industry group saw the largest increase in underlying insolvency volumes with 3,198 (69 more, a 2.2% increase) compared with the 12 months ending Q3 2019^[2].

“We are seeing first-hand the struggles and challenges our members are grappling with in the wake of national lockdown and severe disruption to trade. We advise our members to consider alternatives in their debt collection procedures for example, in response to reduced operational running of the courts and reduced HMRC enforcement activity since UK lockdown was applied on the evening of 23 March; Temporary restrictions on the use of statutory demands and certain winding-up petitions have been extended to 31 December 2020, taking the opportunity to not send overdue accounts straight from credit control to legal action but use a third party in between, saving court costs and the frustrations involved of taking legal action. At Top Service we have adapted our collections methods to suit the struggles of contacting companies who are working from home and potentially on furlough – achieving great results. We advise members to look at their options for collection, take advice from their collections service provider on the best course of action and consider all options, a one-step approach is not always the most effective.”

Are you struggling to recover the money you are owed?

Top Service debt recovery service is operating normally. Our team are proving that their skills are second to none with the results we are achieving during this challenging time. Top Service members have access to an exclusive combination of no collection, no fee recovery services.

“We welcome the opportunity to talk to you about any bespoke changes you would like to make to our debt recovery procedures to fit the culture you have for maintaining customer relationships, whilst addressing the need to keep cash flow as fluid as possible for your business.Please contact our collections team to talk through any individual cases or to explore how else we can support you,” Emma Miller, Company Director Top service.

Contact our helpdesk team today on 01527 518800 to discuss how Top Service can support and help you protect your business.

During these challenging times we urge our members and the wider construction industry to protect their businesses by actively monitoring trading experiences and acting upon early warning signs.  Don’t wait for the information to come to you, use an industry specific service that can spot changes in payment patterns resulting in regular, more in-depth and up to date checks being carried out to pick up information quickly.

Look at your options for collection, take advice from your collections service provider on the best course of action for you and your customer. Consider your options, a one-step approach is not always the most effective. Above all, ensure your credit control team have the tools and support to be able to be pro-active.

Our debt recovery service is operating normally. Our team are proving that their skills are second to none with the results they are achieving during this challenging time. Top Service members have access to our exclusive combination of no collection, no fee recovery services.

We welcome the opportunity to talk to you about any bespoke changes you would like to make to our debt recovery procedures to fit the culture you have for maintaining customer relationships, whilst addressing the need to keep cash flow as fluid as possible for your business.Please contact our collections team to talk through any individual cases or to explore how else we can support you.

It is important to me to know that we are doing everything we can to support our construction industry during this challenging time.

Emma Miller, Company Director of Top Service

Emma Miller, Company Director of Top Service answers some of your frequently asked questions to help you improve the success rate of your payment collection processes.

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:

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 is 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.

Are you struggling to recover the money you are owed? If so, contact our helpdesk team today on 01527 518800 to discuss how Top Service can support and help you protect your business.

We aim to keep our members and the wider construction industry abreast with news and updates affecting our sector during these difficult times.

On 31^st March 2020 the Rt Hon Alok Sharma MP wrote a letter of thanks to the construction industry for the national support effort the industry is providing. “Whether by building temporary hospital wards, installing complex and life-saving oxygen systems, constructing the infrastructure that society needs to function or ensuring that people have safe and healthy homes to live in, you are delivering for our Nation through this difficult time. My heartfelt and personal thanks for everything that each and every one of you is doing to support our joint national effort.”

To date Construction sites have not been asked to close. Rt Hon Alok Sharma acknowledges that the Government has advised that wherever possible, people should work at home but that those working in  construction will have a requirement to travel to their place of work and should do so in line with public health advice and guidance from the Chief Medical Officer.

In response and to assist the industry the Construction Leadership Council (CLC) have provided further guidance on site operating procedures and how construction sites should operate safely during the COVID-19 pandemic to align with Public Health England. As this health guidance updates, the SOP will reflect any changes and can be found published on the Construction Leadership Council website.

The government have also updated and published other guidance and building safety updates which can be found  https://www.gov.uk/guidance/remediation-and-covid-19-building-safety-update-27-march-2020

We are committed to supporting the construction industry and continue to provide a full service. In our 29 years of trading our customers operating within the construction industry has always been our number one priority and that principle still applies in these unprecedented times. For help and support with credit management and debt recovery please do not hesitate to contact our experienced team of advisers: helpdesk@top-service.co.uk or call 01527 518800

Read: Coronavirus (COVID-19): letter to the construction sector

Each year, construction businesses write-off thousands of pounds because of bad debt caused by late and non-payment.

So, how do you mitigate the risks associated with bad debt and are you claiming everything you are entitled to?

Emma Miller, Company Director for Top Service has the following advice;

“As cases of coronavirus (COVID-19) increase throughout Europe and the UK, the adverse impact to the construction industry is very real. The overall risk to your business is great given the complex nature of build projects and their reliance on a fluid supply -chain, delays caused by late and non- payment is nothing new to the construction industry but in a time of uncertainty it is ever more important to ensure you have the right financial procedures in place and you are claiming all that you are entitled to. 

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 than three letters are sent in-house before you refer. If your customer has not responded to your requests, then there is most likely a problem and it will be prudent to refer swiftly into the next stage of your pre-litigation collection process.” 

Where an invoice is not paid or is paid late, the Late Payment of Commercial Debts (Interest) Act 1998 allows you to claim interest and compensation and the Late Payment of Commercial Debts Regulations 2013 allows you to claim recovery charges above the compensation amount awarded. ” 

Are you claiming everything you are entitled to?

“Interest claims for non-payment are split into two categories, contractual and statutory. Contractual interest must be stated in the terms & conditions and / or contract and agreed with the customer before the product / service is provided. 

The majority of construction businesses who are providing trade credit to customers will turn to the statutory interest legislation to ensure they are being compensated for late payment. 

The statutory legislation (Late Payment of Commercial Debts (Interest) Act 1998) allows for interest to be claimed at 8% above base rate and also a compensation claim of either £40, £70 or £100.00 depending on the value of the debt.

The statutory legislation can be applied to business debts that are ‘late.’ The Government outlines ‘late’ as being 30 days after either the customer receives the invoice or you deliver the goods/provide the service (if this is later than the customer receiving the invoice). Unless you have agreed longer terms to pay with your customer. In these cases, the debt would be ‘late’ after those agreed terms have passed.

In terms of raising invoices for these late payment charges, there is no need. You claim your interest and compensation on the gross amount of the invoice. Your customer should treat the payment of interest to you as they would bank charges. There is no need to raise a separate invoice for these charges. 

To enable your customer to process payments for interest and to ensure you are covering any required pre-action protocol should the need for legal action be necessary it is advisable to confirm your claim for interest within your chasing letters. If you are passing your case to a 3^rd party for recovery, then your nominated 3^rd party should do this for you. 

Can you pass the debt collection cost onto your customer? 

Any claims for your debt collection costs not claimed under the statutory legislation should be agreed within your terms & conditions and / or contract with your customer.  Under the Late Payment of Commercial Debts (Interest) Act 1998 you can claim a compensation figure, depending on the value of the debt you are collecting:

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

To help improve your chances of a successful collection for interest and / or charges and to meet any pre-action protocol required for legal action you should ensure any claims for interest, compensation and charges are ‘reasonable”.

For more information on debt prevention and recovery contact our expert team.

Please be assured that we are currently working as normal. Please click below to see our full policy relating to the Covid-19 outbreak.

Coronavirus policy.

As a business operating in the construction industry, it’s important that you get paid on time and what you’re owed in full by your customers and suppliers. Late payments, and payment disputes, can be costly to your business and have long-lasting repercussions.

The construction industry 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 relations or causing negative impact to your projects can be a never-ending cycle.

Improve the success rate of your debt collection process

By taking a consistent and robust approach to your business’s credit management process you will minimise your risk of late and non-paying customers. Information is key so they say, the more information you can acquire on a potential customer the greater your chances of securing payment on work carried out or supplied. Using a credit application form is the easiest way to ensure relevant and appropriate details of the potential customer are being taken. It doesn’t have to be long winded or lengthy, simply take the basic details you need to open a credit account and protect yourself:

Company Name AND Registration No
The entity of business if not Limited
Names of key people in the business
Contact numbers & email addresses

Using a credit application form is one thing but the key to protecting yourself is in the detail and checking the form and information provided for any anomalies is where you will be able to protect yourself the most.

Check?

• Use a credit reference agency to check you have been approached by a bone-fide company.
• Check the Directors of the Limited company and see if they have a lot of either active Directorships, resignations or insolvent companies.
• Use your credit reference agency to look at the trading history of the business, have other suppliers experienced non-payment or made enquiries about potential fraudulent applications.

Tip: Where you can, make a physical visit to the customer or potential customer if something doesn’t feel right to you. 

Research and Monitor Company Trading History:

We urge our members and the wider construction industry to protect their businesses by  actively monitoring trading experiences and acting upon early warning signs.  Don’t wait for the information to come to you, use an industry specific service that can spot changes in payment patterns resulting in regular, more in-depth and up to date checks being carried out to pick up information quickly.

If you already have a trading history with the business look at the orders that have previously been placed. Some companies will establish a good line of credit with suppliers, placing small, regular orders to give the appearance of a good customer. However, once an order pattern starts to change, ask questions to establish the reason for the change.

Act Early

It is important to react to new information regarding your debtor. For example, how many other people do they owe, is there a new CCJ, has the credit limit dropped? if so, why? This is all information you should react to. For example, if a new CCJ is registered then you should skip a few steps in your credit control process and get it to a third party asap. Alternatively, pick up the phone and talk to your customer. It would not be unusual for you to be monitoring the customer so it should come as no surprise to them that you know about the new information.  

Do not ignore your gut feelings, noise on the ground or unusual trading patterns with the business. For example, why is the business asking for much more than usual and why are they not answering your call or following up on an email when they normally would? Has there been a sudden change in the way payment is received? 

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 than 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.

Act on information early and protect your business from the impact of bad debt. 

A one size fits all approach should be avoided. 

Look at your options for collection, take advice from your collections service provider on the best course of action for you and your customer a one-step approach is not always the most effective. Above all, ensure your credit control team have the tools and support to be able to be pro-active.

Know your rights

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:

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.

If you are unsure about what interest and other charges you are entitled to contact us for FREE advice.

Summary:

1. Carry out robust and consistent financial processes.
2. Information is key. Use a credit application form to ensure relevant and appropriate details of the potential customer are being taken.
3. Monitor company trading history.
4. Act Early. It is important to react to new information regarding your debtor.
5. A one size fits all approach should be avoided. Look at your options for collection, take advice from your collections service provider on the best course of action for you.
6. Know your rights. When it comes to claiming interest, whether it is contractual interest or statutory interest, you are entitled to it.

New figures released by the Registry Trust (January) state that there was a 20 percent drop year-on-year, in the number of County Court Judgments (CCJs) registered against businesses in England & Wales in Q4 2019^[1]

The total number of judgments against all businesses decreased from 29,303 in Q4 2018 to 23,418 in Q4 2019, and was accompanied by a 21 percent drop in the total value of judgments from £117,546,664 in Q4 2018, to £92,311,503 in Q4 2019.

The fall in business CCJs largely affected incorporated businesses. The numbers fell by 27 percent, from 21,373 in Q4 2018 to 15,626 in Q4 2019. Judgments against incorporated businesses account for 67 percent of all business judgment numbers and 74 percent of their total value.

Statistics released by the Registry Trust are a good indicator of the economy, however the construction industry contributes seven percent of the economy and received the highest number of insolvencies by sector in the 12 months ending Q4 2019, the construction industry group saw the largest increase in underlying insolvency volumes with 3,198 (69 more, a 2.2% increase) compared with the 12 months ending Q3 2019^[2].

Emma Miller, Top Service Company Director said:  “The spike in the number of insolvencies felt by the construction industry lies in part to the ongoing economic uncertainty across the UK, driven by political unrest, Brexit uncertainty, delays in investment for large construction projects and heavy competition for contracts pushing construction companies to work to tight margins; plus the wave of several high-profile corporations going into administration which has rocked the industry. These economic factors have undoubtedly had an impact on the drop in company CCJ’s. With all this uncertainty, filing for a CCJ brings considerable risk of expense to the claimant which has contributed to the number of CCJ’s dropping, we have also seen a sharp fall in the value of CCJ’s claimed for. The smaller the value of the claim the less companies and individuals are inclined to take the risk to proceed with court action.  There are many myths around the process and outcomes of serving a company with a CCJ. We recommend the claimant take all reasonable steps to collect the monies owed before entering into litigation and seek expert advice to fully understand the process and responsibilities in taking court action. ”

What is a County Court Judgement and what to consider?

A County Court Judgement (CCJ) is essentially a court order, issued by a county court, that enforces the payment of a debt. A CCJ acts as evidence of insolvency and can be used to close a company by its creditors. Court fees and solicitors’ fees can be high and although added to the claim amount, if the debtor doesn’t pay the claimant will be left to pay the court fees. Regardless of how spurious a defence if filed by the defendant, the correct process has to be followed, incurring further fees. Once a claim is submitted, there can be a lengthy wait for a court date. Despite many thinking that if the claimant wins the case in court the other side pays the costs – that is not always the case. 

There of course many options when considering legal action to recover a debt. Information is key, especially within the construction sector which relies heavily on reputation. Consider local knowledge, trading history, previous credit information and information gathered through the collection process. The more information acquired will not only help guide the claimant to the most effective type of action but will be used as evidence in court, increasing the claimant’s chances of a successful collection through legal action.

Instructing a third-party collections service:

With the financial uncertainty of proceeding with a CCJ, it is wise to seek professional and expert advice. Instructing a collections service will ensure that all of the required pre-action protocols are covered prior to legal action and trained negotiators will get the best outcome in court. Instructing a third party will take any personal relationships out of the equation which businesses can struggle with when collecting debt. A collections service provider will focus on relevant credit information to form a collection strategy and should advise to proceed only if sufficient evidence is available.

For enforcement advice or more information on credit management, debt prevention and recovery  services, please contact Top Service by calling 01527 518800 or email helpdesk@top-service.co.uk.

[1] Counnty Court Judgements against England & Wales businesses fall 20% year on year in Q4
[2] Company insolvency statistics, Q4 October to December 2019

We are ready and excited to be attending:

Executive Hire Show 2020

The Ricoh Arena, Coventry 5th & 6th February 2020

“This Show brings the industry together and is the annual event where passionate hirers meet Innovative suppliers. To be held on Wednesday 5 and Thursday 6 February 2020, Executive Hire Show is a trade-only event open to hire executives throughout the UK and Ireland, and it has also attracted hire industry visitors from Europe and beyond. Senior executives from the procurement and purchasing departments of the national hire operations attend the Show, along with large numbers of independently-owned entrepreneurial hire outlets. 

If you are attending the show let us know and come along to visit our stand K58, Hall 1. We have our expert staff on hand to answer your credit management questions and offer useful tips and advice.

Learn how you can make the most of our services from debt prevention to debt recovery.

For a bit of fun, come to our stand and try your luck at our Lock Box Challenge, unlock the box to win a prize!

We will also be giving away Top Service goodies from bumper stickers and pens to tape measures and mugs so, make sure you grab your Top Service merchandise when you visit our stand.

Want to join us at Exec Hire 2020?

To find out more about Executive Hire Show 2020 and to register your attendance visit:http://www.executivehireshow.co.uk