Ask any business, whether an SME or a large corporation, and they’ll tell you there is an instant feeling of relief when a client’s payment hits their bank account. They’ll also tell you that the work that goes into constantly chasing those payments can have a wide-ranging impact on the financial health of their business. With insolvency-related activity hitting a nine-month high in the region last month, businesses can’t afford to be complacent when it comes to debt recovery. Colin Churchward, partner at North East law firm, Muckle LLP, discusses what you can do to ensure your business is in the best position possible to take back control.
- Share the burden
Colin says: “Chasing unpaid invoices can be stressful, time-consuming, and all that work adds a significant cost to the business before (and if) the payment is even recovered. Having a strong debt recovery strategy in place is key, and bringing in third-party legal expertise as part of that strategy can be the difference between getting paid on time or not at all.”
Muckle has been recovering debts for 30 years and has ranked top tier in the Legal 500 UK directory for its services. Colin says the firm’s approach through its debt recovery service Muckle Collect, is tried and tested, and the results speak for themselves: “We recover 92% of debts, which is significantly higher than the national average of 40-50%. Clients are able to upload their debts to our online portal and track progress in real time. But they also have the security of knowing that we’ll seek recovery of their outstanding debts without the heavy-handed approach that risks damaging important client relationships – a key concern for any business chasing payment.”
- Act early
“My advice to businesses is simple – act early. The earlier you act, the more options you have. The longer a customer owes money, the greater the chance of their business facing difficulties, potentially leading to default on the debt. Also, your customers will likely have multiple creditors. Businesses that are proactive with their debt collection will see their invoices paid first.”
“That includes working with a professional, accredited debt recovery service. Muckle can work to support you at all parts of the debt recovery process, but the sooner you engage with us – the less time, energy and money you’re spending trying to recover these debts.”
- Make sure you have payment policies in place
“It’s important to manage business-to-business expectations from the start and always have a contract. Having a contract formalises the working relationship between the parties.
“We would always advise that best practice is to have a contract in place that covers clear payment terms, policy on late fees and interest, and agreed conditions before working with your client. Even though it’s tempting to trust a business connection, a properly drafted contract with payment terms that are clear and simple and that protect you has the benefit of ensuring clarity should a dispute ever arise.
“That’s something we can help with, we’re a full commercial law firm, so we can support with everything from T&Cs to contracts.”
- Learn from your successes and failures
“A famous man once said, ‘if you always do what you’ve always done, you’ll always get what you’ve always got’ – looking back at what has worked and what hasn’t worked can be a significant factor in successful debt recovery.
“Muckle Collect really comes into its own by allowing our team to get far greater insight into probability and predictability. In short, it helps determine the approaches that get the best results for a range of clients, and this can help inform the team’s advice. This not only helps speed up the debt recovery process, but it also makes for better outcomes.
As Colin explains: “Ultimately, the data analytics and tracking aspect of what we’re doing marks us out as being very different in debt recovery – it strengthens processes further and helps us become even better at debt recovery for clients.”
- Charge interest
“When a client is late in paying, you are legally entitled to charge interest known as ‘statutory interest’. Statutory interest is 8% plus the Bank of England base rate for business-to-business transactions; however, if you’ve already set a different interest charge for late payments in a contract, you cannot add statutory interest on top of it.”
For more information on how Muckle can help you, contact Colin Churchward on 0191 211 7969 or email colin.churchward@muckle-llp.com