Back in May 2011, we published an article entitled How to Outsource Debt Collection and Manage Credit Risk, outlining how firms might find it beneficial to outsource some aspects of credit control, in order to make up for a lack of in-house admin capacity for chasing overdue accounts, and so on.
So you’ve delivered on your side of the bargain, the customer’s happy with the goods or services received, and then the invoice deadline day comes and goes without any sign of the funds in your account.
What do you do if your customer stops answering their phone or replying to emails – or worse, if you discover the only method of communication you have for them has been cut off completely?
The important thing is not to panic, as there are logical steps to take to try and get back in touch with the client – however bleak the situation seems, there is always the chance it is a simple misunderstanding.
1. Reaching out
If you can re-establish contact, then you can pursue your unpaid invoices in the normal way, so reach out to your customer even if you’re not sure where they are.
Look online for alternative contact details, perhaps by checking directory listings for their company name or website URL, and try calling any number that might reach anyone at their company.
Remember, you might not need to find the exact person you dealt with – all you need is the finance department to be able to resubmit your invoice for payment.
2. Get social
Check the social networks to see if there are any active profiles in your client’s name, as this might give you some clues as to their location.
Often you will discover that they’ve gone on holiday for a week without their mobile phone, so if you find a timeline full of beach snaps, it’s worth waiting a few days then trying to call or email them again.
3. Be important
Make yourself a priority, so if they ARE receiving your emails, you don’t just get ignored. It sounds petty, but setting your email to high importance – with the little red exclamation mark – really can work.
If your email client supports it, set your email to request a read receipt too, and if this comes back to you, you know your messages are getting through.
Be polite and professional, but firm – make clear that you are owed money that is now overdue, and will take the necessary legal action to recover it.
4. Get help
At CPA we are able to offer tracing services for clients who have gone off the radar, and we have a success rate of around 85%.
There are no guarantees – sometimes people really do just vanish completely – but if your non-paying customer is out there, we know the best ways to track them down and recover your money.
5. Don’t give up
Finally, it can be tempting even from the very beginning of the process to simply give up and assume you’ll never find your runaway client.
These people owe you money that is rightfully yours, and they CAN be found – often quite easily and quickly – and with the legal right to charge the debtor for reasonable recovery fees, there’s no reason for you to end up out of pocket either.
Keep the faith and call on CPA if you need help finding your debtor, and together we can make sure those funds end up in your bank account where they belong.
At the Cash Protection Agency, we now offer a Terms and Conditions service, providing you with a customised set of Ts & Cs to give to your customers, or checking through existing terms you may have in place.
But why is this important – surely the law protects you against any wrongdoings by your clients? Well, yes and no, so here are five crucial things to bear in mind.
1. Mutual consent
First of all, remember that most aspects of the law governing payment for the provision of goods or services are optional – you are not obliged to chase debts, or to petition for a CCJ or bankruptcy due to an unpaid invoice.
Having clear Ts & Cs in place upfront lets your customers know that you are serious about expecting prompt payment, and will not let them simply disappear into the night without paying you.
2. Get in first
Next, you can bet that if you don’t have terms and conditions, your customer will, so take advantage of your status as the supplier and get in first with a set of terms you’re happy to work to.
If you end up having to agree to the customer’s Ts & Cs, it’s likely that they’ll ask for 60-day or 90-day payment terms, or even longer in the case of big brand-name clients, so demanding 30-day terms upfront is essential to maintain healthy cash flow.
3. Fees and charges
Under late payment legislation, you are already entitled to add certain penalties and statutory interest to overdue invoices, but you’re likely to encounter opposition from your customer if you try to do so.
Spelling it out in your Ts & Cs just cements the fact that they will have to pay up – there’s no way to claim ignorance of the rules if they’ve signed and agreed to your terms from day one.
4. Bespoke terms
It might seem tempting to ‘borrow’ terms and conditions from somebody else, but this is fraught with pitfalls – and it’s not unknown to see Ts & Cs that mention the entirely wrong currency, if they were found online.
Our bespoke service takes a set of terms and conditions that suits your industry area, but we then spend up to a full hour editing them to make sure they are absolutely spot-on to your needs.
Even if you are an individual contractor or freelancer, having a set of terms and conditions unique to you shows professionalism, and this can help to reduce the risk of clients trying to take you for a ride.
A slight apparent weakening of the UK’s economic recovery may in fact be a good thing, according to the BBC’s economics editor, Robert Peston.
In the last quarter, ending in September, UK growth dropped slightly from 3.2% to 3% on an annualised basis, and in particular Mr Peston singles out the hospitality and distribution sector for attention.
This industry – which includes retail distribution, as well as hotels and restaurants – was coming off of quarterly growth of 4.9%, 4.4% and 4.4% in the previous three periods.
But in the latest figures, the sector – which Mr Peston calls a “proxy for household consumption” – saw growth drop to 3.8%, more in line with the economy as a whole.
Manufacturing also outpaced the overall average, at 3.4%, and while admitting this is a tiny sector relatively speaking, Mr Peston suggests this will still be seen as “useful rebalancing” by the Chancellor.
Overall, this makes the economy “a bit less dependent on consumption and services”, which should come as good news in light of the inherent relationship between household consumption and price inflation.
“The Bank of England’s Monetary Policy and Financial Policy committees need have fewer worries that the economy is already becoming too dependent again on debt-fuelled household spending,” Mr Peston writes.
However, there is a new threat to the UK’s economic recovery, and this one comes from overseas, where stagnation in the eurozone could lead to reduced demand for British exports.
If this is the case in the months to come – and particularly if a major European economy such as France or Germany were to crash – then the UK would be left trying to fill the gap left by vanishing export orders.
This in turn could tip the balance back towards domestic consumption, once again putting pressure on the British consumer to effectively bail out the nation’s economy through a ‘keep calm and shop on’ kind of attitude.
Debt recovery practices in several sectors have come under criticism in recent weeks, particularly for the practice of writing to customers under the pseudonym of a law firm, when in fact the letter was prepared in-house at an energy supplier, payday loan lender, or most recently, at one of a number of water companies.
BBC Radio 4′s You and Yours programme reported that 12 of the largest water suppliers in the UK had admitted to sending letters from in-house with the name of a debt collection company at the top, and five said they are still doing so or will carry on doing in the future.
However, this may conflict with Ofwat guidance sent out in July 2014, when the regulator distributed its revised guidelines for dealing with household customers in debt, which it said had been updated in part to “avoid any misunderstanding of Ofwat’s views regarding companies’ use of in-house debt collection agencies”.
Five broad principles form these guidelines, including:
- a commitment to contact customers as early as possible when they fall into debt and throughout the debt management process;
- a commitment to provide a range of possible payment methods and frequencies;
- a commitment to non-threatening, courteous and plain English communication;
- a commitment to take the customer’s circumstances into account when agreeing payment arrangements;
- a commitment to provide a consistent level of service to customers whose accounts have been referred to debt management companies.
Companies who do not clearly indicate that a debt recovery letter has been sent from in-house, rather than by a third-party debt recovery firm or solicitors, risk falling outside of the guidelines’ principles on plain English and transparent communication.
Importantly though, water companies are of course still permitted to pursue for payment – and as they may not legally be allowed to cut off supplies to household customers, doing so promptly is an important measure to avoid unnecessary financial losses.
You may have spotted a new look to the CPA website in recent weeks, and it’s part of a revamp that has also seen the launch of some new services.
There’s still the same core products that long-term customers of the Cash Protection Agency will recognise, allowing you to protect your money when taking on new clients or when getting paid.