Credit Control Solutions

Ltd Co Debtors in Liquidation - Don't Write them off Just yet!

As per Graydon UK, company liquidations rose by 12% between April and June 2008 and there was little change to this rate in the following months.  With this figure being so high, the chances are that most businesses will be affected by at least one of their debtors going bust in the current economic climate.  If your lucky, the liquidation may result in the creditor receiving a few pennies in the pound This can be very hard to take, especially if the debtor has made countless promises of payment prior to the liquidation.   

However, help is at hand in the form of the little known Company Directors Disqualification Act 1986. This states that if the director knew, or ought to have known, that the company was continuing to trade whilst insolvent the court may (following an application by the liquidator) order them to make a personal contribution to the creditors.  Of course, some firms go bust and it is through no fault of the directors. if, however you feel that they were making promises they knew they couldn't keep then you should take action in an attempt to recover your money and to stop the dishonest director from doing it again.

In the case of Northern Rock, the lawyers and accountants found 'insufficient grounds to proceed with any legal action for negligence' against the directors who had been in charge at the time of the collapse.  However Northern Rock have already paid back 57% of the £26bn owed which is more than can be said for most company's going through liquidation.

If you are concerned about the financial stability of one of your clients due to repeated failed payment promises, get the promise in writing (email is sufficient) and from a director.  If they won't provide it, that's a huge red flag and it may be worth speaking to a debt recovery agent sooner rather than later. 

Jamieo "Making Your Cash Flow" (Article courtesy of Eleanor Bateman of Bateman's) 

Changes to VAT Rates

I am sure that you are all aware that the rate of VAT has been reduced to 15% with effect from Monday 1st December 2008.
 
This is just a quick reminder for you all to update your VAT rates in your accounting software! Failure to do this, will result in:

• Customers having a valid excuse for not paying you on time
• Extra work raising credit notes etc

I am certain that all of you have this in hand, but, it doesn't hurt to be reminded just in case!

Jamieo "Making Your Cash Flow"

Credit Crunch: How to Make Money from our Accountant!

Crest Partnership (A partner company) have recently developed a specialism by using depleted asset values caused by the Credit Crunch to generate significant tax deductions that can reduce a company's corporation tax bill.

These schemes include:-

• Sizeable claims for home working
• Asset sales
• Use of FRS accounting standards to claim tax deductions
• Increasing tax losses by changing year end dates 

They are willing to guarantee that their fees for this advice will be covered more than three times by the tax savings you will enjoy in one year alone. It will also resolve any potential section 419 exposure for excessive dividend distribution which is greater than your company's profitability.  Every one of these tax mitigation schemes have been reviewed by a panel of experts that consists of former HMRC inspectors.

If you are interested in talking with Crest about this, please e-mail me and I will put you in contact with them

Jamieo"Making Your Cash Flow"

Recession Proofing your Business

It's official a recession is upon us, this means that you will need to put in place measures to ensure you do not become a bad statistic of the recession

1. Plan, plan, plan! Prepare cashflow projections for next year, next quarter and, if you’re on shaky ground, next week. An accurate cash flow projection can alert you to trouble well before it strikes

2. The key to managing cashflow is to be aware of any problems as early and as accurately as possible. Financial services providers are wary of borrowers who suddenly need to have money today. They’d much prefer lending to you before you need it, preferably months before

3. Finance problems can often be self-inflicted. It seems obvious but companies which send out incorrect invoices often find that their customers end up returning an invoice and requesting a new one. Make sure all your invoices are correct before they’re sent out to ensure your customers have no excuse for not paying. As well as this, you need to take credit control seriously. if you want to know how to do this, just ask by going to our website and filling in the on-line query form, or telephone us

Jamieo "Making Your Cash Flow"

Is the Credit Crunch Affecting your Business?

More so now than ever, it is important that you have a firm grip on your credit control (cash flow). Most smaller business and to a lesser extent medium sized businesses do not know how to undertake their credit control properly.

 

Many businesses view credit control as an inconvenience and therefore do not take it seriously. They fumble their way through preferring to be on the telephone selling, or visiting customers, in fact anything except picking up the phone and asking their customers for payment!

 

If you don’t chase your customers for payment, guess what? Many of them will not pay you, especially in the current financial climate, Most businesses are keeping hold of their cash until they are quite literally forced to pay you.

 

If you adopt the following chase policy you will be successful. If you don’t want to, let us do it for you

• Issue invoices ASAP after supply of goods or services

• Immediately reduce your payment terms to 7 days

• Phone up your customer before the invoice is due for payment to overcome all usual objections i.e. copy invoice, query etc

• Deal with any queries as a priority

• Chase your customers for payment on a regular and diligent basis

• Send out regular chaser letters (implement a proper standard letter process)

• Always use the phone as your primary source of contact with your customers

• If they exceed your payment terms by more than 10 days, put them on stop

• Always refer accounts over 60 days to a collections agency 

To monitor how effective implementation of the above suggested chase process will be, why not start to monitor your Days Sales Outstanding (the amount of time it takes customers to pay their invoices). If you monitor this over a period of time, you will see the average number of days it takes customers to pay you reducing!

Another very simple way of monitoring your credit control performance is to simply take a snapshot of your aged debtors at the end of each month and monitor the percentage of debt over 60 days old. As a rule of thumb, if percentage of debt over 60 days old is higher than 10% you have serious issues. My guess is that lots of your invoices have unresolved queries on them, or you simply do not chase your customers for payment effectively.

 

If you would like us to e-mail templates for DSO calculation & Aged debt percentage comparison calculations, then please visit our website and contact us through our on-line query form and we will be only too happy to do so.

 

Jamieo "Making Your Cash Flow"

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"