When it comes to opening trade credit accounts there is always going to be a level of risk to you and your business. The risk to your business is not just about whether or not you will get paid it is also about whether or not you are about to start trading with a fraudster.

We are now seeing more and more potential fraud being reported from bone-fide company details being used without their knowledge, to fake companies being set up in an effort to obtain goods fraudulently.

We see that the industry is becoming more and more frustrated with how fraud is dealt with and as the #1 credit reference agency for the construction industry, supporting our industry is really important to us.

Here we talk about how you can minimise your exposure to fraud but even with every possible check done, search being carried out and question being asked you should never ignore your gut feeling of ‘something just isn’t right’ because our experience tells us when something doesn’t feel right it usually isn’t!

So, how can you help to protect yourself? Below are some tips and formal checks you can carry out before providing goods on credit, most importantly, don’t just ask and record the details – check them!

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.

What should I 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.

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

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

The internet opens up a lot of avenues to carrying out non-intrusive checks

Look at the addresses you have been given, are they active trading addresses (as opposed to a mailbox)? Is it a residential address when you would expect it to be a business address or vice versa? There could of course be perfectly legitimate reasons for having numerous trading and / or delivery addresses but taking the time to check could be what will save you! Never allow goods to be cross-loaded to unidentifiable vehicles waiting at the delivery location.

Search the business name and or directors / proprietor / partners names with other suppliers you may come across out of area news reports or other information that will help you.

Check phone numbers, dial them or use the internet to search for any reports of mis-use. Once a fraudster leaves your depot or takes delivery that is likely to be your last contact with them. Is the telephone number ringing and is it a normal tone? If it goes to the answerphone, is the mailbox full? This is a sign that messages are not being returned. Why would an active business not return and delete messages?

Send a confirmation email – we hear of so many people whose initial suspicions to fraud are raised when they email the invoice and the email bounces back. Check it first – a confirmation email thanking the customer for their application or order can help to pre-warn you of any problems and is also customer service friendly so your customers will see this a great customer service tool!

In short:

• Confirm the details on the application are true, using credit information, the internet or ID checks
• Check the condition of the business applying for goods on credit
• Is the order consistent with past transactions or as you would expect it to be?
• Satisfy your gut feeling and if you can’t, assess the risk and if needs be decline the application.

Testing is also important. It will help to ensure new processes and current processes are providing the protection you need. Internally, submitting a fictitious order or application will help you to track if you are getting the desired outcome.

What if you are a victim of fraud?

Report it – Call 101 or report to Action Fraud
Share it – Sharing your experiences is the quickest way to stop fraudsters in their tracks. Talk to your trade association or industry specific credit information agency who will be able to make others in your industry aware.

For further information or support relating to fraud prevention or anything else relating to credit management please contact us:

Top Service Ltd
Tel: 01527 518800
Email: helpdesk@top-service.co.uk

2-3 Regents Court
Far Moor Lane
Redditch
B98 0SD

Telesales Consultant

Top Service Ltd has been supplying credit information and debt recovery services to the construction industry for over 25 years. Over 2,600 suppliers to the construction industry currently take advantage of the services offered.

The Telesales Consultant performs a key function within Top Service’s growth plans. The purpose of the position is to increase the customer base, particularly through outbound calls to prospective business customers. The Telesales Consultant will represent Top Service Ltd and will have a comprehensive understanding of the services being offered. Using excellent telephone skills the Telesales Consultant will qualify prospective customer needs, articulate appropriate solutions and ultimately meet sales targets. The Telesales Consultant will be required to develop and qualify both leads coming into the business and leads created through their own means. The Telesales Consultant will have the ability to provide high quality and targeted demonstrations of Top Service’s offering over the phone using the company website. Both prospective and customer information must be accurately recorded into the customer database for tracking purposes. As well as a bonus, the role also offers a commission structure based on an initial number of sales.

To be successful in this role you will need to be a high performer who is:

• Positive
• Energetic and self-motivated
• Tenacious and resilient
• Driven and well balanced
• Goal Orientated

Your key accountabilities will be clear, measured and managed and will include:

• Achieving sales targets of a specific number of sales per month.
• Phone-based activities (average telephone calls per day)
• Building a qualified sales pipeline
• Sales conversion rates and overcoming customer objections
• Productivity
• Maintaining accurate records
• Assisting your direct manager to develop, implement and review the sales process and strategies

Key Benefits:

• A competitive salary with bonus scheme
• A motivated and target driven environment .
• An excellent training programme with ongoing support and recognition
• Healthcare Cash Plan

For further information about this job role and how to apply, please telephone: 

Jo Carby 01527 518800 

We invite you to join our professional network

Following an announcement made by HMRC earlier in the month to extend the date for the implementation of the VAT Domestic Reverse Charge for Building and Construction Services until 1^st October 2020, we thought it prudent to clarify the impact this will potentially have on accounting practices for  businesses operating in the construction sector.

Firstly, what is the VAT Domestic Reverse Charge For Building & Construction Services and who will it affect?

HMRC has introduced the VAT domestic reverse charge for building and construction services initially due to be enforced from the beginning of next month. However, after much controversy the deadline has been extended and will now not be enforceable until October 2020 there remains no transitioning period.

The new VAT reverse charge rules will impact certain Construction Industry Contractors, Trade Contractors and Subcontractors with the aim to defend against on-sale fraud in the construction sector. VAT-registered Contractors who supply construction services to another VAT-registered business will be required to issue a VAT invoice stating that the service is subject to the domestic reverse charge.

The business in receipt of the services must declare the VAT due on that supply to HMRC via a VAT return  instead of paying  the amount directly to the contractor. In short, the ‘customer receiving the service will have to pay the VAT due to HMRC instead of paying the supplier’.

HMRC guidance sets out what you need to do to be ready for the start of the domestic reverse charge which includes ^[1]:

• checking whether the reverse charge affects either your sales, purchases or both
• making sure your accounting systems and software are updated to deal with the reverse charge
• considering whether the change will have an impact on your cashflow
• making sure all your staff who are responsible for VAT accounting are familiar with the reverse charge and how it will operate

What contractors need to do

If you’re a contractor you’ll also need to review all your contracts with sub-contractors, to decide if the reverse charge will apply to the services you receive under your contracts. You’ll need to notify your suppliers if it will.

What sub-contractors need to do

If you’re a sub-contractor you’ll also need to contact your customers to get confirmation from them if the reverse charge will apply, including confirming if the customer is an end user or intermediary supplier.

Further guidance and a comprehensive list of construction services affected and those exempt can be found here.

¹ What you need to do to be ready for the start of the domestic reverse charge

We are proud to announce that our internal Credit Management Training has passed the quality endorsement criteria with Open College Network (West Midlands). This stamp of approval is important as it reflects the high standards we place on our staff training and continual professional development programme.

Emma Miller, Top Service Managing Director said;

“We are delighted to be awarded this seal of approval by the Open College Network (WM). Our staff training is an integral part of our business which ensures we deliver to our members exceptional customer service which is up to date and thorough. Our training is a platform for our staff to develop their career within Top Service, learn new skills and provides individuals with the essential competencies to progress further with industry recognised qualifications.”

Our training offer includes core modules covering:

• Credit Management
• Customer Service
• Civil Litigation
• Collection Techniques

About Open College Network West Midlands

Open College Network West Midlands is a national and international Awarding Organisation, regulated by Ofqual, qualifications Wales and the Quality Assurance Agency for Higher Education (QAA), to develop and award regulated qualifications.  We work in partnership with a wide range of stakeholders including colleges, training providers, employers, universities, schools and voluntary and community organisations to offer vocational credit-based qualifications across a wide range of sectors.  With a proud history of developing skills solutions across industries for over 35 years, we offer over 250 vocational qualifications that range from Entry Level to Level 5.  As a highly responsive, commercially minded and flexible Awarding Organisation we are constantly developing new qualifications for our diverse customer base. We work with over 350 organisations covering all regions and countries in the UK, as well as also working internationally. Over recent years the organisation has been the recipient of numerous awards, including the SME Midlands Business Award for Best Customer Service.

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:

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.

This April we saw an unprecedented move by the Chartered Institute of Credit Management (CICM) to take action on companies who fail to meet the standard of the Prompt Payment Code (PPC) which has seen 17 companies removed or suspended from the Code during the past quarter for failing to meet the majority of their payments within 60 days of an invoice being issued.The published list holds the names of several major construction companies reflecting badly on our industry but not unsurprisingly given that construction companies write-off thousands of pounds because of bad debt caused by late and non-payment each year. According to a study carried out by specialist financial services provider Bibby Financial Services (BFS) and industry experts, The Vinden Partnership (TVP) ‘Sub-Contracting Growth’ 2018 reveals that three-fifths of subcontractors working in the construction industry (60%) have suffered from bad debt in the last 12 months, with the average firm writing-off £16,149 each year^[1].

“The move by the CICM is welcome to the industry as it recognises the struggles companies face when it comes to late payment, particularly for the construction industry. As a company, we are proud to be an approved signatory of the Prompt Payment Code. For over 25 years we have been supporting the construction industry with tools and information to increase their protection from bad debt as well as developing services to assist with the collection of overdue invoices. We know first-hand the impact late payment has on our members. The knock-on effect from the top of the chain to the bottom can be devastating,” says Emma Miller, Company Director Top Service. 

What is the Prompt Payment Code (PPC)?

The Prompt Payment Code (PPC) is administered by the Chartered Institute of Credit Management on behalf of the Department for Business, Energy and Industrial Strategy (BEIS). Compliance with the principles of the Code is monitored and enforced by the Prompt Payment Code Compliance Board. The Code covers prompt payment, as well as wider payment procedures. 

Member Benefits

All signatories of the Prompt Payment Code (PPC) are eligible for a 25% discount on our subscription fee.

Are you claiming everything you are entitled to for bad debts?

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. ” 

 “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 you 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.

^[1]                                 The Vinden Partnership (TVP) ‘Sub-Contracting Growth’ 2018

We are looking forward to exhibiting alongside the Construction Plant-hire Association at Plantworx 11-13th June, Peterborough. Plantworx is the “UK’s dedicated working construction event with a showcase of Plant, Tools, Equipment & Services”. We will be on hand to support CPA members and answer any of our customer’s credit management and debt recovery questions. Further information about the show and how to register can be found here https://www.plantworx.co.uk.

Over the last few days we have learnt that Swansea-based contractor Dawnus has confirmed that it has gone into administration and the parent company for Interserve, the troubled government contractor is also appointing Administrators.

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.

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

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.

We have become aware of an anomaly regarding the filing of annual accounts with Companies House which is seeing previously large credit limits temporarily plunge to zero, potentially bringing into question a company’s credit-worthiness.  These credit limits, calculated by credit reference agency computer algorithms, are heavily relied upon throughout the construction industry.

All UK limited companies are required to keep accounting records regardless of whether they are trading or not.  Every year a limited company is required to file a set of accounts with Companies House, with the detail of the information depending on the size of the company.  Even non-trading companies must file ‘dormant accounts’ unless they have a special exemption.  Private limited companies have nine months after their year end to file while public limited companies must file within six months.  Credit reference agencies then use sophisticated computer programs to analyse this financial information and suggest a suitable credit limit but everything hinges on ‘current financial information’.  Once the filing deadline has passed the previous year’s accounts are considered to be too old for analysis.

Our quality control team at Top Service has identified occasions when companies have filed their accounts at the last minute, for example, accounts are filed on the last day of the month which happens to be a Friday.  It’s a bank holiday weekend so Companies House doesn’t actually upload the information until Tuesday, so the accounts didn’t make the filing deadline and the credit reference computers may temporarily reduce the suggested credit limit to zero until the new accounts can be analysed.  Most limited companies engage a firm of qualified accountants to prepare and file their financial statements and they may routinely be filing very close to the deadline without considering  the wider implications.

Top Service director Emma Miller has the following advice:

“Firstly, as a director of a limited company you need to ensure that you are getting your company’s annual accounts signed off well before the filing deadline.  You then need to communicate with your accountant to ensure that the financial statements are being filed at least five working days before the filing date.  Some accountants may be in a routine of ‘just in time’ filing so don’t assume that the accounts will be filed as soon as you’ve signed them off.  Ask your accountant for a specific date that they will be filed and be aware that weekends and bank holidays will have an effect on when Companies House will actually upload the information to the system and pass it onto the credit reference agencies for analysis.  Communication is key here”.

So, what sort of companies are jeopardising their credit ratings?  Is it just small companies?  Not according to Emma Miller:

“This problem seems to apply to very large companies as well as smaller companies. We have seen companies with suggested credit limits of £10m whose accountant is filing on the very last day of their filing deadline and risking their client’s credit limit temporarily being reduced to zero.  The only answer is for company directors to take responsibility for when their information is actually being submitted to Companies House”.