Collecting debts.[check] This checklist deals with the question of debt collection and should be used in conjunction with the checklist on Controlling Credit. All businesses which operate on the basis of extending credit to customers and clients will, from time to time, be faced with the situation when payment is overdue OVERDUE. A bill, note, bond or other contract, for the payment of money at a particular day, when not paid upon the day, is overdue. 2. The indorsement of a note or bill overdue, is equivalent to drawing a new bill payable at sight. 2 Conn. 419; 18 Pick. . At what point extended credit becomes a debt to be collected and how urgently is a matter for individual decision. This checklist outlines sound principles for action from that point onwards on·ward adj. Moving or tending forward. adv. also on·wards In a direction or toward a position that is ahead in space or time; forward. Adv. 1. . Definition Debt collection is the generic name generic name n. 1. The official nonproprietary name of a drug, under which it is licensed and identified by the manufacturer. 2. for the processes and procedures adopted by organisations which have extended credit for goods and services In economics, economic output is divided into physical goods and intangible services. Consumption of goods and services is assumed to produce utility (unless the "good" is a "bad"). It is often used when referring to a Goods and Services Tax. to customers or clients and then find that payment is overdue, or not forthcoming spontaneously. Action checklist 1. Remember that prevention is better than cure Think about the possible steps which may be taken to minimise the possibility of bad debts. Decide who will operate your policy. Some of the options include: * factoring agency * lawyer or agency who provides access to standard stationery The term for boilerplate in the Eudora mail client, starting with Version 3.0. Stationery files are stored on disk and brought into new messages or added to replies. See boilerplate. * your own staff--either dedicated exclusively to debt collection, or part of the accounts control or credit team. Be aware of the Late Payment of Commercial Debts (Interest) Act 1998 which makes provision for claiming interest on outstanding debts. The legislation aims to deter late payment and penalise Verb 1. penalise - impose a penalty on; inflict punishment on; "The students were penalized for showing up late for class"; "we had to punish the dog for soiling the floor again" penalize, punish late payers. 2. Identify needs inside the organisation There will be a need for: * systems which detect arrears A sum of money that has not been paid or has only been paid in part at the time it is due. A person who is "in arrears" is behind in payments due and thus has outstanding debts or liabilities. and potential bad debts early * good communication and understanding between departments, especially sales, accounts, credit control and debt collection * staff with procedural knowledge Procedural knowledge is the knowledge exercised in the performance of some task. See below for the specific meaning of this term in cognitive psychology and intellectual property law. and good interpersonal skills "Interpersonal skills" refers to mental and communicative algorithms applied during social communications and interactions in order to reach certain effects or results. The term "interpersonal skills" is used often in business contexts to refer to the measure of a person's ability * regular review of policies, procedures and criteria for granting or extending credit * firmly applied policies with regular reviews to ensure that debt collection procedures are implemented immediately if they are appropriate * regular training or refreshers in interpersonal skills, procedural and attitudinal practices, for example, in developing both a persistent and sympathetic manner. 3. Concentrate on big debts Remember that 20% of your debtors probably account for 80% of the debt outstanding at any one time. An even smaller percentage is involved in bad, or potentially bad, debts. Pursue the big debts first and remember that, while it may be easier to collect the smaller sums which are overdue, this may not necessarily be the best approach. The effectiveness of debt collection should be assessed by the amount of money recovered and not by the number of debts collected. Bear in mind, however, that: * several smaller debts can add up to one large debt * for a large debt a phone call before it falls due may be appropriate * for a small debt the process may start with a letter one month after payment is due * debts are seldom as simple as a single invoice or one month's transactions--they usually involve many transactions with invoices and credit notes over several months. 4. Write positive letters Recognise that in the first instance an approach by letter is cheaper than approaching your debtors by telephone. Be sure that your letters are courteous cour·te·ous adj. Characterized by gracious consideration toward others. See Synonyms at polite. [Middle English corteis, courtly, from Old French, from cort, court; see , clear, specific and addressed to a named executive. Be firm, concise and unwavering. Do not include an apology, suggest compromise or refer to the possibility of part-payment. Do not avoid the issue of payment now by asking for reasons for nonpayment rather than for payment. Recognise that an excuse is no substitute for your money. Understand that if you make threats you must be prepared to carry them out if you do not wish to lose credibility. Having pursued a debt by letter, re-apply your control of credit procedure before extending further credit. Consider putting all business on a deposit in advance or cash on delivery (COD) basis until you receive payment and can satisfy your conditions for the granting of credit. For maximum impact ensure that your letters appear to have been individually prepared. To show individuality individuality, n collective characteristics or traits that distinguish one person or thing from all others. and demonstrate the monitoring of debts make reference to previous letters, quoting dates. Avoid the use of the word 'first', such as 'first demand'. 'First' implies 'second' or more to follow--don't give the debtor another reason to delay payment. Avoid the use of 'final' unless you mean it. Be polite, be brief and be firm. Give the debtor a better reason for paying than for not paying. For example: * offer an opportunity to protect the debtor's reputation * point out the advantages of continuing to trade together * point out the advantages of enjoying--but not abusing--credit terms, and of ensuring their continued availability * suggest that payment will ensure that third parties do not become involved * express the hope that legal action can be avoided. Many organisations have three or four letters which escalate es·ca·late v. es·ca·lat·ed, es·ca·lat·ing, es·ca·lates v.tr. To increase, enlarge, or intensify: escalated the hostilities in the Persian Gulf. v.intr. in tone and authority. In order to provide proof for any potential legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. , these need to be issued regardless of other courses of action. 5. Follow up letters by using the telephone if appropriate and necessary The telephone is an essential tool in collecting payments. You should not underestimate, however, the cost and time commitment involved with telephone calls. Before calling the debtor be fully prepared. Have available all files, copies of invoices, and: * the debtor's correct name and legal status * the name of the person you need to talk to * the amount, date and full details of the debt * the agreed terms and conditions of the sale or supply * details of previous communications, if any * the date of the last payment (if any) received * how you will respond to excuses, requests for more time to pay and requests for acceptance of part payment. Having contacted the right person, give your name and personalise Verb 1. personalise - make personal or more personal; "personalized service" personalize, individualise, individualize alter, change, modify - cause to change; make different; cause a transformation; "The advent of the automobile may have altered the growth the discussion. Recognise the need for persuasive skills to gain commitment, to convert interest into action and to find out reasons for the delay--they may be relevant to the future generation of credit. Find out, if you can, whether a query, dispute, financial problem or oversight lies behind the delay in payment. If you are told "a cheque is in the post", press for details. When was the cheque sent, where from, and what were its date and number? If it was not for the full amount outstanding, why? If the debtor fails to honour a promise made on the telephone, you will need to consider what further actions to take. Likewise, if you cannot gain access after several attempts to the person to whom you wish to speak, escalate the debt recovery chain. 6. Remember the fax as a variant to a letter Note that a fax message gives a sense of immediacy im·me·di·a·cy n. pl. im·me·di·a·cies 1. The condition or quality of being immediate. 2. Lack of an intervening or mediating agency; directness: the immediacy of live television coverage. and that faxed messages tend to be dealt with more quickly than letters. Remember that the content may be more public within the debtor's organisation--those concerned may be embarrassed into payment. A fax or email may be sent direct to the desk of the recipient and therefore gain immediate attention. 7. All else having failed, consider visiting the debtor Visiting is the least cost-effective method of collection; it is difficult for those who wish to avoid confrontation, and you may feel that you have lost face if you leave without a cheque. If you decide to visit the debtor, arrive unexpectedly, be firm, courteous and unwavering and, if you do not collect a cheque, move quickly to the next stage. 8. Appoint a debt collection agency Use only those agencies registered with the Office of Fair Trading The Office of Fair Trading or OFT is a non-ministerial government department of the United Kingdom, established by the Fair Trading Act 1973, which enforces both consumer protection and competition law, acting as the UK's economic regulator. and which have a good reputation. Don't pay the agency 'up front' or agree to a flat fee. Agree only to pay a percentage of what the agency recovers. Obtain a banker's reference and talk to other users of the agency. Be sure that you know the agency's terms and conditions and that they are acceptable to you. 9. Think carefully before you instruct in·struct v. in·struct·ed, in·struct·ing, in·structs v.tr. 1. To provide with knowledge, especially in a methodical way. See Synonyms at teach. 2. To give orders to; direct. v. solicitors or become involved in litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. Remember that solicitors are expensive and require payment whether or not they achieve results--seek advice and a price before any commitment. Litigation is even more expensive. Be sure, before you start, that the debtor has money with which to pay, that you have reasonable evidence of the existence of the debt and that the debt is less than six years old. Be sure that you have the full name and address and legal status of the debtor. 10. Don't return a post-dated cheque without thought A post-dated cheque is better than no cheque. It may be paid if presented. It provides proof of debt if the bank does not pay the cheque. Consider carefully, however, whether you want to continue trading on the basis of post-dated cheques. 11. Be aware of the Administration of Justice Act 1970 Be aware of the dangers of being charged with harassment Ask a Lawyer Question Country: United States of America State: Nevada I recently moved to nev.from abut have been going back to ca. every 2 to 3 weeks for med. , for example by threatening violence, damaging property or breaking and entering breaking and entering v., n. entering a residence or other enclosed property through the slightest amount of force (even pushing open a door), without authorization. If there is intent to commit a crime, this is burglary. . Know that you must not make such demands of your debtors as to cause either them or their families concern, distress or humiliation, either by their nature or their frequency. Remember that you must not represent yourself as having some official capacity with authority to enforce payment. Dos and don'ts for collecting debts Do * Know your customers--customer knowledge can help to prevent rather than cure. * Remember the effort that went into making the sale for which you have not been paid. * Consider the consequences of not being paid. Don't * Start your collection process by offering compromise * Forget that it's your money you are chasing--not theirs. Useful reading Late payment, John Stanworth, Small Business Research Trust, Lloyds TSB Lloyds TSB Group plc (LSE: LLOY) is a banking and insurance group in the United Kingdom. It was formed in 1995 by the merger of Lloyds Bank and the Trustee Savings Bank (TSB). The Group's head office is at 25 Gresham Street, London. Milton Keynes Milton Keynes (mĭl`tən kēnz`), town (1991 pop. 36,886) and borough, S central England. Milton Keynes was designated one of the new towns in 1967 to alleviate overpopulation in London. It is the seat of the Open Univ. : SBRT SBRT Stereotactic Body Radiation Therapy SBRT Sociedade Brasileira de Radioterapia (Portugese) , 1999 Better payment practice: a guide to credit management London: Department of Trade and Industry The Department of Trade and Industry was a United Kingdom government department which was disbanded with the announcement of the creation of the Department for Business, Enterprise and Regulatory Reform on 28 June 2007[1]. , 1998 Costing pricing and credit control: how to improve profitability, how to get paid, Keith Kirkland and Stuart Howard London: Kogan Page, 1998 Useful Addresses Factors and Discounters Association Boston House, The Little Green, Richmond upon Thames Richmond upon Thames, outer borough (1991 pop. 154,600) of Greater London, SE England. The borough was created in 1965 by the merger of the municipal boroughs of Barnes, Richmond, and Twickenham. , Surrey TW9 1QE Tel: 020 8332 9955 Fax 020 8332 2585 www.factors.org.uk Institute of Credit Management The Water Mill, Station Road, South Luffenham South Luffenham is a village in the county of Rutland in the East Midlands of England. It once had a railway station that was located to the north of the village and also served the neighbouring village of North Luffenham. It was opened in 1848 and closed in 1966. , Oakham, Leicestershire LE15 8NB Tel: 01780 722900 Fax: 01780 21333 www.icm.org.uk Better Payment Practice Group, 020 7655 0530 www.payontime.co.uk Thought Starters * What percentage of your turnover is represented by overdue or bad debts? * Do you know which customers have a history of late payment? * Do your customers know when payment is due and what your procedures are in the case of overdue payments? * How can you maintain good relationships with your customers without giving the impression you will overlook bad payment practice? * Are your staff aware of customer credit limits? |
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