Credit Control Solutions

Claim What you are Entitled to !

Late Payment Legislation

In November 1998, the UK Government introduced legislation to give businesses a statutory right to claim interest from other businesses for the late payment of commercial debt. The UK was one of the first countries in the EU to introduce late payment legislation to help promote a culture of prompt payment.

Amended late payment legislation came into force in the UK on 7 August 2002, which fulfilled the UK’s obligations under the EC Directive on late payment and brought additional benefits to businesses.

For commercial contracts dated before 7 August 2002

All small businesses, with 50 or fewer employees, can use the rights given to them by the Late Payment of Commercial Debts (Interest) Act 1998 to claim interest retrospectively.
For commercial contracts dated from 7 August 2002

From 7 August 2002, the Late Payment of Commercial Debts (Interest) Act 1998 was amended and supplemented to incorporate the features of European Directive 2000/35/EC on combating late payment in commercial transactions.

Under the revised legislation, all business owners and managers can claim reasonable debt recovery costs and can benefit from the simplification of the calculation of Statutory Interest. Additionally, small and medium sized enterprises can ask a representative body to challenge grossly unfair contract terms used by their customers that do not provide a substantial remedy for late payment of commercial debts.

The compensation entitlement varies in accordance with the size of the debt

The revisions to the legislation also include the simplification of the calculation of statutory interest. A reference rate is now used to determine the late payment interest rate, which is fixed for a six-month period.

For further information and help with calculating interest and debt recovery costs, please visit our website by clicking the following link Credit Control Solutions

Is your credit controlling you or are you controlling it?

There is only one thing worse than having no work - and that is having lots of work, but not being paid for it! To minimise the risk of this happening to you, you should take the following credit control precautions.

You should know the financial strength of the company you are doing business with or proposing to do business with. This is a good indication as to whether or not you are likely to be paid on time or even be paid at all! use of a good credit checking service will help you with this.

There must be proof that the customer to whom you supplied your goods or service actually placed an order with you. In an ideal world there will be a signed order, or a purchase order form the customer to you for purchase of the goods or service. In today’s “I want it now” society, getting a signed order is not always possible. An e-mail, Fax or letter from the customer to you or from you to the customer is just as good. The important thing is you must be able to demonstrate that an order has been placed.

You must always ensure that your customer is aware of your terms of business or sale before they do business with you. Including your terms of business on the back of your invoice is a good way of re-enforcing your terms, but, it cannot be your only method of hi-lighting your terms.

Always ensure that the details on your invoices are accurate, since inaccuracies will damage your credibility and will be used by the customer as an excuse for delaying payment. Please our website to see the rest of this article.

Credit Checking

When you consider that performing a credit check could cost as little as £2.50, is it really not worth bothering with? Good credit control is all about being in control. If you do not know the financial strength of the company that you are doing business with are you really in control?

It is good practice to make credit enquiries for:

• Any new customer
• An existing customers who’s payment pattern has deteriorated
• An existing customer where your credit exposure is very high (e.g., If as a result of non-payment you are left in financial difficulties)

In the credit vetting process, you cannot afford to rely solely on the apparent size of the organisation. It is normally the larger organisations that fail to pay or fail to pay you on time.

Once you have decided to extend a customer credit terms, then set them a credit limit and notify them of both the limit and the general terms of trade upon which you are prepared to do business with them. Also, ensure that these terms are stated in your contract and on your invoices.

Withhold further credit from any customer who has exceeded his credit limit or whose account is significantly overdue. Alternatively make an arrangement to supply him with, say, £500 of extra work for every £1000 that he pays off his account.

Credit checking is not a “one-off” exercise, it should be continuously monitored and re-evaluated, taking account of both the customer's payment history with your own business and by regularly updating the externally available information.

Jamie O "Making Your Cash Flow"