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One of the most important aspects of good credit control is to know who you are dealing with.  We are often asked to pursue debts owing, only to discover that things are not quite as they appear.

By way of example, are debt owed by individuals or companies?  Or by someone in a personal capacity or by their business?

To save time and costs, it is important to ensure the correct legal entity is pursued from the outset.  It is all too easy for a debtor not to pay, if he can say the invoice has been incorrectly issued or pursued.

To help prevent these problems:

• Make sure that you ask the question when first providing goods or services – who are these being provided to?
• Do a credit check if you do not know the customer, if the value is significant. 
• For large orders, ensure that written terms are signed to confirm the relationship.
• Follow up on debts promptly – a current debt is much easier to recover than an older one.

For practical, cost effective solutions in relation to recovering debts please contact Jenna Mistry of the Cash Protection Agency Limited on 0808 149 7287

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One in five SMEs say they would like to apply for lending in the future, but doubts about the current economic climate will stop one in eight from doing so, according to research from BDRC Continental.

In the latest instalment of its SME Finance Monitor, the brand found that 19% of those surveyed fall under the classification of ‘future would-be seeker’.

This means that, in the future, they would like to be able to seek out borrowing, but probably will not do so.

Around two thirds of future would-be seekers, equivalent to 12% of all SMEs, cited doubts about the economic climate as their main barrier to borrowing.

Shiona Davies, director at BDRC Continental, says: “Whilst we are seeing signs of SMEs retrenching in terms of their use of external finance and the increasing obstacle of the current economic climate for those wanting to seek finance, there are also some positive signs.”

These include maintained expectations on growth and profitability, growing awareness of the Funding for Lending scheme throughout the UK, and the chance to create a greater level of confidence if more small businesses can be made aware of the current 70% approval rate for those who seek to access the scheme.

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Deregulating the labour market during a turbulent economic cycle may not be a good idea, according to one expert on the matter.

Professor Guglielmo Meardi, resident expert on European employment relations at Warwick Business School, explains that deregulation typically makes it easier to dismiss staff in the short term.

However, it has a lesser effect in terms of boosting recruitment, which can mean a net increase in joblessness immediately following deregulation.

Professor Meardi points to certain economies within the eurozone as examples of where this might be occurring – and of the dangers of doing so during difficult economic times.

“After three years of labour market reforms and austerity, jobless figures are at a record high in the eurozone, while they decline elsewhere,” he says.

“This seriously questions the appropriateness of the tools used so far – all the more that the countries that have reformed and cut with most zeal, Spain and Greece, are also the ones with the worst results.”

He adds that deregulating the jobs market not only risks raising unemployment, but also poses an associated threat to jobseekers’ confidence and a danger of “paralysing employers”.

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We’d all like healthier-looking cashflow, whether on our business or personal accounts – it means less stressing about overdue payments, and more free funds for spending on purchases and investments.

So how can you help your company’s cashflow to remain as liquid as possible? Well, there are a few easy ways to start off, and they’re not dissimilar from the ways you might look after your personal finances.

As counterintuitive as it might sound, one important way to keep control of your cashflow is to make sure your payments go out on time.

Paying your own bills on time – providing there is enough money in your account – is entirely within your own control, so avoid running up late fees unnecessarily, and you can leave yourself free to chase any debts that are owed to you.

We’ve discussed the importance of a logical invoicing procedure in some detail in previous months, so we’ll gloss over it here – but needless to say, accurate invoices sent to the right recipients are more likely to be paid without a problem.

And if you send a clear and accurate invoice to the right place and it still does not get paid on time, consider carefully your next course of action.

For trusted clients who you know have just made a mistake, it’s totally fine to be lenient on deadlines; however, for those with no clear excuse, prompt debt collection action gives you the best possible chance of getting the funds into your account as soon as possible, and maintaining the health of your cashflow.

This month, we’re placing the spotlight on Jenna Mistry, a much-valued member of the Cash Protection Agency team who’s making a name for herself across the CPA‘s online presence.

You may have spotted her on the CPA blog back in April, when she wrote a piece discussing the newly introduced EU Late Payment Directive (2011/7/EU) and its potential for small businesses.

But the eagle-eyed amongst you may have seen her from a slightly different angle the month before, when Jenna was ‘roped in and roped up’ as part of a fundraising effort by CPA’s sibling company, Edward Hands & Lewis Solicitors.

She scaled the giddy heights of the Leicester Ramada Encore Hotel, in order to abseil down the outside as part of a five-man team.

The event, on Saturday March 9th, was in support of Leicester Charity Link, and the five plucky EHL‘ers were among 104 abseilers who took part on the day – apparently including Spider-Man himself.

We’re proud of our charity work, and it’s always good to see all of our employees getting stuck in, so we look forward to throwing Jenna into plenty more scrapes in the future, all in a good cause of course!

Until then, you can find her at the CPA offices at The Old School Rooms, Loughborough Road, Leicester, where she’ll be happy to take enquiries relating to credit control and enforcement action on overdue payments.

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Hot off the heels of our recent hugely successful seminar on the topic, here we take a brief look at the EU Late Payments Directive, and what it might mean for SMEs.

First of all, what is the EU Late Payments Directive? Well, in principle it harmonises the regulations surrounding overdue payments in EU member states.

In practice, the UK’s rules remain slightly different from those of countries in the eurozone, as we already had a clear system of recompense for those inconvenienced by late payment.

The legislation now allows for you to charge statutory interest at a rate set twice a year from the Bank of England base rate – this was already allowed in the UK.

You can also charge a flat fee of £40, £70 or £100 depending on the amount you are owed – this was also already allowed.

For the first time, the legislation also clearly allows you to claim back any debt recovery costs from the debtor – this is new, and should mean you receive just as much in total by calling in the debt collectors as you invoiced for in the first place, plus interest.

You cannot ‘profit’ from the payment being late, so the three-tiered flat fee must be used towards your recovery costs, with any remainder claimed back from the debtor, rather than the flat fee being added on top of the total.

But it still makes it clearly a creditor’s world for small businesses, who might previously have let late payments slide due to fears about the cost of taking action.

The challenge for lenders is to get consumers to recognise that their policy is likely to be insufficient, and to devise an alternative way of repaying their mortgage that is suitable for them, and does not put their ownership of their property at risk.

In May, we looked at some of the advice being given to consumers – including the CML’s plans to write to all interest-only mortgagors to encourage them to look again at their finances.

But one of our readers, Fantham, left a comment asking for more detail about what the CML, ABI and BBA are doing to ensure customers are treated fairly by their members – so here’s a little extra information.

Council of Mortgage Lenders (CML)

We have already noted the CML’s plans to write to all interest-only mortgagors covered by its members, urging them to address their repayment plans, and prioritising those whose endowment policies are due to mature by 2020.

In October 2012, a CML News & Views update looked at the issue in detail, confirming that:

• the CML provides a ‘risk toolkit’ to lenders, helping them to mitigate potential repayment risks;
• some lenders have already reclassified interest-only mortgages as a niche product;
• new interest-only mortgages are being offered mainly in the buy-to-let sector.

But the CML added that consumer choice and privacy are also concerns – in many cases, borrowers with interest-only mortgages will have made alternative arrangements to pay it back, whether through savings other than an endowment policy, or by selling their home to repay the loan.

The effects of inflation should also be considered, the CML pointed out, as the original value of the loan will, over time, become eroded in real terms, effectively making it less costly to pay off upon maturity.

In terms of those who already have interest-only mortgages, the CML said: “This includes a mix of interest-only borrowers who will differ depending on: the length of time they have left until their mortgage matures; their age; their income; the level of equity they hold in the property; their level of savings and other financial assets; and their future plans.

“Existing interest-only borrowers will therefore have different needs and concerns, and potential problems and solutions, depending on their individual circumstances.”

Interest-only borrowers are already contacted annually and reminded of the importance of having a suitable plan to pay off their mortgage upon maturity, and some lenders have gone further than this to remind their customers more regularly to check their financial position.

Endowment policies should be reviewed every two years, with a traffic-light system used to warn the borrower of any risk of a shortfall.

A red letter indicates a high risk of a shortfall upon maturity, and should be met with swift action by the borrower; however, if you have received a red letter about your endowment policy, it also means you have a time limit of three years in which to lodge a mis-selling claim.

Association of British Insurers (ABI)

The ABI seems more concerned about the impact of endowment policy mis-selling on the investibility of British banks and, disregarding the three-year limit on compensation claims if the lender has followed the guidelines and issued a red letter, calls for a fixed time limit on lodging a complaint of mis-selling.

In a December 2012 publication on the issue of British banks’ investibility, the ABI said: “It is clear that UK banks’ valuations are weighed down by a range of legacy issues, including PPI mis-selling provisions … interest swap mis-selling and, now, the prospect of investigations into interest-only mortgages and ‘bundled’ current account charges.

“In order to contain uncertainty around ‘conduct charges’ we would support the Confederation of British Industry’s recent suggestion that the government considers introducing a statute of limitations for all PPI claims, capping the time period during which legal proceedings can be initiated.”

While the wording of the statement applies only to PPI mis-selling, it seems likely that the ABI would welcome similar ‘statutes of limitations’ if applied to the other contentious products listed, which include interest-only mortgages and interest rate swaps, among others.

Other than this, there seems to be little mention of endowment policies with regard to interest-only mortgages – at least in public – from the ABI, which is more likely to discuss endowments in the sense of lump-sum inheritance payouts that are left to relatives upon your death.

British Bankers’ Association (BBA)

The BBA has been all but silent on the issue of endowment mortgages for several years now, at least in terms of the information they make publicly available.

Back in August 2009, they published a research report prepared by GfK Mystery Shopping entitled ‘Impact of Claims Management Companies’ Activities on Consumers of Financial Services‘.

This was largely an attack on Claims Management Companies (CMCs), calling for tighter regulation, more rules about the information they must give to potential customers (such as an insistence that call centre staff should be required to tell callers who are making an initial enquiry that their company is “regulated by the Ministry of Justice in respect of regulated claims management activities”) and so on.

However, it glossed over several of the statistical results obtained by GfK Mystery Shopping, including:

• 15% of UK adults have taken action against a bank, credit card or loan provider since April 2007;
• 10% have claimed back current account charges;
• 4% have lodged a PPI mis-selling claim;
• 3% have made an endowment mortgage mis-selling claim.

Remember, these figures date back to August 2009 – meaning the percentages are likely to have grown substantially during the years since.

Of those who had made a claim or complaint:

• 40% went directly to their bank or lender;
• 47% used a CMC;
• 30% used a solicitor.

The BBA explains away the fact that these percentages add up to well over 100% by saying “there is some overlap here, suggesting that certain consumers used more than one avenue”.

But the only likely reason for this to be the case would be if the customer initially approached their bank and had their complaint rejected, forcing them to take legal action using a solicitor or specialist CMC – something the BBA seems dead set against, based on the overall tone of the document.

Behind Closed Doors

There is limited potential to find out what discussions are still taking place behind closed doors, but from what is publicly available, it seems the CML are the most active in terms of encouraging lenders to treat their customers fairly.

However, even their guidance seems to apply only in advance, encouraging people to take appropriate action if their endowment policy is showing signs of a shortfall with several years left before maturity.

For those already coming to the end of their mortgage terms, the options are bleak, and involve a combination of:

• relying on inflation to have degraded the real-terms cost of paying off the shortfall;
• demonstrating mis-selling in order to claim compensation;
• paying the shortfall using personal savings;
• equity release or downsizing the property to one that can be paid off in full.

Beyond that shortlist, consumers are likely to need to get innovative about the way they clear the remainder of their mortgage, and while it’s hard to be sure exactly what advice lenders are being given at present, it is still the case that contacting your mortgage provider sooner rather than later, and maintaining an open dialogue, are the best ways to tackle any kind of mortgage arrears or shortfall with the lowest risk of repossession.

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Net lending to businesses fell by £3 billion in April 2013, the third consecutive monthly drop, according to the latest figures from the Bank of England.

After a £1.7 billion rise in January, falls of £2 billion, £545 million and now £3 billion have all been driven by falling net loan amounts.

Overdrafts have added to the trend in February and April, although in March, net balances on overdrafts actually increased by £247 million.

In total, £470 billion is now owed in loans and overdrafts, with £435 billion in loans and a further £35 billion in overdrafts.

Within this figure, 37% of the total is owed by small and medium-sized businesses, while large firms account for the remaining 63%.

Over the past six months, total lending to businesses has now fallen by a monthly average of £1.7 billion, and a total of almost £10 billion.

This reflects the longer-term trend, which has seen a fall of just under £20 billion over the past 12 months, with January 2013 the first month to see a net increase since August 2011.

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A County Court Judgment (CCJ) will be registered as public information for a period of six years.

However in some instances you may find the debtor still avoid payments. Don’t give up on chasing the payment it is duly owed to you and you are entitled to receive the full amount. If the CCJ remains unpaid there are various options available to you whereby the extra costs will be added to the CCJ and the debtor will be liable to pay the additional amount.

The two key enforcement options which you should bear in mind to recover a unpaid CCJ. You could use the Bailiff Section of the Courts to levy on assets at the debtors address to fulfil the amount of the CCJ. Alternatively you could have the debtor orally examined in Court as to their means and/or property and possessions to enable an Attachment of Earnings to be arranged.

An Attachment of Earnings would mean the debtor’s employer will be liable to deduct a proportionate each month week/month from the debtors wage until the amount of the CCJ is fulfilled. It is important to note an Attachment of Earnings cannot be issued against a self employed debtor.

Remember there are other enforcement options such as third party debt orders and charging orders which may be available to you. Contact the Cash Protection Agency on 0116 2688965 if you have any questions. Do not let the debtor get away with not paying when you have already provided the goods or service.

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If you do not renew your tax credits by July 31st, your payments might stop; this now-familiar warning from HM Revenue & [...]

Customs has become a common feature of the calendar period between April and July, when tax credit renewals are due.

However, another increasingly common warning from HMRC has also made its now-regular appearance, as tax credit claimants have been warned not to fall for ‘phishing‘ scams, a kind of email spam attack.

These emails typically suggest that the recipient may be entitled to receive some money, and link to a website that purports to allow you to claim this money by providing the site with your debit or credit card, or bank account details.

As a consequence of providing these details – which, of course, go to the scammers and not to HMRC – you may find funds taken from your account, or in the worst cases could fall victim to identity fraud from organised criminal gangs.

It may sound like an extreme possibility, but last year almost 22,000 reports of phishing attacks were received by HMRC between April and July alone, during the tax credit renewals period.

Nick Lodge, director general of benefits and credits at HMRC, says: “HMRC will never ask you to disclose personal or payment information by email. We are committed to your online security but the methods fraudsters use to obtain information are constantly changing, so you need to be alert.”

The best ways to avoid falling victim to one of these scams are all relatively easy, and can include:

• check the website URL and compare it with the real HMRC website – if there are any differences, do not trust it.
• never follow links from unexpected emails, without checking that they lead you to the correct site.
• check that the displayed text of the link is actually the address it links to – if something else appears in your browser’s status bar when you point to the link, do not click it.
• never give payment details out in response to an HMRC email, as they will never contact you by email to offer you money.