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Cash flow is vital to businesses and it is for this reason that we see more and more organisations coming to us to handle their debt portfolios.
Whatever the size of debt, we know we can help. On one hand we act for organisations who have a very large number of relatively small debts, on the other we deal with a few debts, but each one runs into thousands of pounds.
Our clients range from sole traders and partnerships through to some of the largest finance houses in Europe.
- bulk debt portfolios
- the 'life cycle' of a debt
- the five golden rules of cash flow management
bulk debt portfolios
Whilst we are happy to handle small volumes of debts, our strength lies in our ability to handle bulk debt portfolios. We have invested heavily in technology and for larger portfolios, have written bespoke systems to specific client specifications, so that we can act more quickly and efficiently.
Additional benefits for bulk debt clients include:
bespoke reports - giving key information specific to client needs
on-line direct access to our systems for instant updates on matters
e-mail reporting
flexible fee structures suited to the characteristics of the debt
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the 'life cycle' of a debt
An unpaid invoice becomes a bad debt as soon as the payment date is passed. From this day a business is up against not only a client who may have no intention to pay, but also against the clock. The longer a debt is left, the less chance there is of it being paid.
The creditor has two choices. They can leave it for another few weeks in the hope that the client will pay, or they can pursue the debt. Initially they may wish to pursue the debt themselves, but some organisations do not have the time or the resources to do this. If they wait in the hope that then client will pay, they have the difficult question of how long do they wait? A week? A month?
Whichever choice the creditor takes, they could come a time when it is clear that the client is not going to pay. This is where an efficient debt recovery operation will come into it's own.
What follows is an idea of the work we do and the way in which we can help businesses in this situation.
On day 1 we are notified by the organisation of the debt. We immediately issue a Letter Before Action to the debtor. This letter states that if payment is not forthcoming within the next seven days, action will be taken to recover the debt. Sometimes, this letter does the trick and the debtor pays, or offers to pay part. If the debtor offers to pay part, we let the creditor know so they can decide whether to accept or reject the offer.
If they do not respond, we will take further action and issue a claim form.
When the claim form is received, the debtor could offer to pay, in which case the case closes. Alternatively, they could offer to pay by installments. If this is the case the creditor can decide whether to accept the offer. If the offer is accepted, Judgement is awarded on the terms agreed and the order is enforced. If the offer is rejected, it is left for the court to decide the payment terms. If the debtor files a defence against the claim, the case becomes defended, and would go into our litigation section for resolution. An example of this could be if an organisation supplied goods to a client who was withholding payment because they felt the goods were faulty.
If no response is received from the debtor to the claim, Judgement can be made in default. The Judgement is then enforced. There are four main ways of enforcing a judgment:
- Warrant of execution - an order where a Court Bailiff will attend the premises of a debtor to try to remove goods to be sold at auction to settle the debt.
- Attachment of earnings - an order in which the Court orders the deduction of certain sums on a weekly or monthly basis from the debtor's wages. (No order can be made against a self employed person).
- Third Party debt order - similar to an attachment of earnings order, but the payment is taken directly from the debtor's bank or building society account.
- Charging order - an order which secures payment of the debt by way of a financial interest of a debtor, for example land or property.
Once these orders are in place, we can monitor the effectiveness of the action. If for some reason the order is unsuccessful, we can then investigate alternative ways of recovering the debt.
the five golden rules of cash flow management
There is no magic formula to effective cash management, but the following guidelines should help you to manage your debt situation more effectively.
- let your clients know your payment terms before you do any work for them
- ask for money on account, and continue to ask for top ups as the limit is reached
- if your payment terms are fourteen days, make sure you chase on the fourteenth day, not the sixteenth or later - show them you want your money
- do not be afraid of chasing big clients - whilst they may be major clients, do you really want them if they don't pay you for your work? (obviously you need to use your discretion)
- use professionals to manage your debt portfolio - they know what they are doing, will never miss a deadline and have heard too many hard luck stories to be 'fobbed off'.
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