The Alchemy of Debt Recovery

Debt Recovery Specialist in Dorset

The definition of “alchemy” is supernatural power! I have had the accusation levelled at me that I do in fact possess a gift when it comes to the skill of recovering monies that are owed to my clients. I am not sure that being called a witch is terribly complimentary!

The reality is that providing my client prepares the ground work and, keeps his or her house in good order then my job is made that much easier. Well documented files are a must should it come down to non payment because of a dispute.

That preparation by my client starts at the point of sale...It doesn’t matter whether my client is selling a widget, recruitment services, scaffolding, accountancy, or marketing services, the list is endless. What does matter is that you know your customer / client as intimately as possible.

For instance, when someone comes to you for a service do you have any mechanism in place to obtain a credit worthiness score? Alternatively, do you have an account application form which helps you gather as much information as possible and includes the option of seeking referee details? Do you seek references?

If none of these steps are appropriate to your particular business sector then have you ensured that you have strong terms and conditions of business, terms that have been reviewed recently and are enforceable? Are your terms notified to your client prior to the striking of the deal? Furthermore, have those terms been acknowledged and accepted?

So many of my clients are quite happy that their terms have been incorporated into the contract, however, they are disappointed when I point out that adding their payment terms on an invoice, for instance, “Payment terms 14 days” it’s far too late. The deal has been done, the work carried out and the contract to all intents and purposes has been closed.

You cannot introduce a new term to your contract following its conclusion unless it has been agreed by both parties – it’s just too late. For the most part however, the customer will pay up... eventually!

Let’s talk about your credit control procedures for a moment. Do you have any procedures in place? If not, now is an excellent time to get your book-keeper to review your systems in terms of what happens following conclusion of a job or supply of goods / services? A number of smaller businesses don’t have anything in place at all and put their faith in their customer paying up on time. Although I hate to be the harbinger of doom and gloom, the current economic climate does not look set to improve any time soon, clients are hanging on to their money for as long as possible and in some cases your client won’t be in a position to pay you because they too are waiting to be paid! I believe it’s called the domino effect...Sad, but true, many larger companies, who can pay you, believe that because of their powerful position in the market and their importance to you as a client, they can stretch their payment terms to 90 + days. What do your terms of business say with regard to late payment? Some time ago now, legislation was introduced to try and protect you from late payers. The Government introduced the Late Payment of Commercial Debts (Interest) Act 1998 – it was introduced in 2002.

The legal status of the business you are seeking to claim interest from is irrelevant. It can be a sole proprietor, partnership or limited liability company. You cannot apply late payment interest however to personal debt.

Let’s wind back a bit, you have picked up on the fact that you have not received payment – I would hope that you have some sort of diary system in place that alerts you or your book-keeper to the fact that your money hasn’t arrived. What’s the first thing you or your credit controller should do? It is essential that you get in touch with your client – I always prefer talking to people when it comes to money – it is so easy to ignore a letter, e mail or text!

Putting people on the spot, politely of course, is the best way to establish whether there is a genuine reason for non-payment. Are they a cannot pay or won’t pay case? If the “cheque is in the post” make sure you make a diary note to follow it up in say 5 working days time. If after 5 days your cheque hasn’t arrived, and depending on how patient you are inclined to be, suggest an electronic bank payment. Better still if you have access to a card machine then offer to take a debit or credit card payment. Please avoid sending out standard letters before you have spoken to your customer – again standard letters are easily ignored.

Now might be a good idea to calculate the interest and compensation your client now owes you? For help in calculating interest and compensation there are many self help websites out there. Have a look at which is very helpful and gives the answers to many “frequently asked questions”.

If you didn’t state a payment period in your terms of business, the aforementioned legislation states that a payment becomes “late” after 30 days. Currently you can charge 8% above the prevailing Bank of England base rate. In addition, you can charge compensation on each and every individual invoice.

The amount of compensation that you can charge depends upon the amount of the invoice.

Up to 999.99 you add £40.00 per invoice
1,000 to 9,999.00 you add £70.00 per invoice
10,000 and over you add £100.00 per invoice

It may be enough to advise your client that if the payment does not arrive as promised then you will add interest and compensation.

If it is the case that they are not able to pay their debts as they fall due consider entering into a stage payment agreement – but beware – don’t get yourself into a position where should you need to sue at a later stage they are able rely on some onerous term that you agreed to in order to secure payment.

In my experience it pays to seek professional advice at the point of non payment. Your customer will often sit up and pay attention when they are contacted by a third party seeking payment on your behalf. A third party can assist you in maintaining a good relationship with your client who should understand that in these tough times cash is king and we all deserve to be paid on time!

So, is there an element of alchemy? ...... Maybe!

1 Review your current credit control procedures – include your bank details on your invoices and ask for electronic payment it will boost your cash flow.
2 Do your homework – when supplying new customers obtain a credit report.
3 Ensure your terms of business are up to date – be proactive and chase early.
4 Ensure your terms of business are notified to your client at the very beginning of your relationship.
5 Demand interest and compensation.
6 Enforce your terms of business, if you are due payment on day 15 ensure that you pick up the telephone and ask for payment, follow that with a formal letter of demand.
7 Ensure the lines of communication remain open.
8 Don’t allow your client to fob you off – be firm.
9 When all else fails give me a call!

Acquit Debt Recovery are debt recovery specialists based in Dorset.

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For a friendly chat and guidance, call Acquit Debt Recovery today on: 01202 432022, or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it .


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