In difficult trading times the importance of recovering invoices is crucial. Implementing credit management policies is a good start in the war against late payments. Ensuring finance and purchasing departments are adopting the policy procedures and being aware that sales are incomplete until paid for is also crucial!

When new customers open a credit account, your credit control policy should commence. Ensure that basic information is obtained prior to trading by asking customers to complete a Credit Account Application Form. This information will help you to assess whether the risk you are taking in allowing credit is commercially viable. The form should include the customer’s name, contact details and legal entity. Your Terms of Trading should appear on the reverse. By signing the completed form, the customer will be agreeing to your Terms of trading.

If after the sale of goods or services the invoice is still unpaid, then regular reminders should be sent via letter and phone to chase the debt. There are occasions when this is not enough and you start to experience aged debts.

Numerous debt collection methods are available including; in-house collection, debt collection agencies or through solicitors. Debt collection agencies charge a percentage of recovery and use various methods of collection mostly by telephone or letter.  

Solicitors are often wrongly perceived as being expensive. However formal letters of demand will sort out the ‘can’t pays’ from the ‘won’t pays!’  Solicitors can issue proceedings to recover unpaid invoices, fixed costs and interest. Interest may be recovered at either the Court rate  (currently  8%) from due date of payment, at your contractual rate in accordance with your terms and conditions or under the Late Payment of Commercial Debts (Interest) 1998.  It is also possible to recover compensation under the Late Payment legislation.   If your unpaid invoice is for more than £5,000 interest will continue to accrue post Judgment .

If no response is received to the proceedings then Judgment will be obtained.  A County Court Judgment is a Court Order for a fixed amount.  The details of the Judgment are entered on to The Register of Judgments, Order and Fines.  This information is then passed onto credit reference agencies, which will make it difficult for the debtor to gain credit in the future.

Once obtained it is possible to issue one of the following enforcement proceedings:

• Warrants - execution against goods – County Court bailiffs or the High Court Enforcement Officers (HCEO’s)
• Charging order – placing a charge over the debtor’s home or business address
• Third Party Debt Order (formerly known as a garnishee order) – obtaining monies owed to your debtor from a third party
• Order to Obtain Information – obtaining your debtor’s financial details under oath
• Attachment of earnings – debtor’s employer pays regular instalments to you via the Court

An experienced solicitor will advise you on the most appropriate and cost-effective method of enforcement.

Sarah Lock, Debt Recovery

Tel: 01284 762331
Email: sarah.lock@ashtonkcj.co.uk

This article is for general information purposes only and does not constitute legal or other professional advice. You should not act or rely upon this information.

Other articles