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In the present recession, cash flow for organisations may be a problem, in that if they are owed money for work or sales they will have to consider their options on Debt collection. Do they start by talking to the debtor company or do they engage the services of a solicitor to pursuefollow up the debtor for payment. A Debt collection agency could offer curiously lucrative deals such as no win no fee, but such agencies may take it that just a minor payment from the creditor is a win and so collect their fee, which may be reckoned on the whole debt. Not all Debt collection agencies would work in this way, but would their web sites display this much detail and so give the creditor the knowledge to undertake an informed decision? The other option is to take on the Debt collection themselves by making use of a Debt collection package, comprising Debt collection software and Debt collection letters. Such packages can be had from under £50 and companies who distribute these packages should be assumed to be able to give exact details of what is contained and maybe also some idea of the time required to use the software for a normal Debt collection process. The costs for a solicitor or a Debt collection agency are likely to be on a sliding scale and would generally be based on the debt value, although a solicitor may charge a set fee for the first letter, any further Debt collection letters may be charged extra perhaps.

When running Debt collection software packages both the creditor and the Debt collection software should know about the Late Payment of Commercial Debts (Interest) Act 2002, which was originally set up in November 1998 and amended in August 2002. This legislation allows a creditor to claim both a one-off payment and also interest charges once an account goes overdue. If the creditor has not referred to this act in the original contract with the debtor, there is nothing in the way of them from implementing the aforesaid charges. However it may cause some concern from the debtor to be just shown a higher bill and this may bring in problems should the creditor later submit an application for a new contract with the debtor business. To try and save this from coming about it would be best for a creditor that hasn’t referred to the act to contact the debtor either by phone or by personal visit and courteously inform them that the account is late and they would not wish to have to make the charges that they are entitled to do by the act.
If this fails to stir the debtor into payment, then the creditor will should use the Debt collection software in earnest and compose Debt collection letters, which should already be contained in the Debt collection software as templates, ready to use once the debtor details are entered into the database. The creditor should be able to amend the Debt collection letters wording to mirror their situation or relationship with the debtor, but they must resist using emotional wording as this will show them in an unprofessional light with the debtor. In this way it is hoped that the debtor will be persuaded to settle the account and also pay up on time in the future.

In the present economic situation and with finance houses still being unwilling to offer finance to small enterprises, a small company awaiting payment for jobs done orproducts furnished may think twice before contacting solicitors or Debt Collection companies, especially if these have been used previously. While solicitors and Debt Collection companies which have expertise in commercial Debt Collection may offer a high quality service, this does come at a rough price of some 8% to 10% of the debt, plus expenses and further charges if the case goes to court.

But just suppose the small company had access to the techniques used by Debt Collection companies and could generate good quality Debt Collection Letters all for a single one-off cost of under £100, would they be wise to ignore it? They would be able to do this with Debt Collection Software and provided they select carefully the small company may well have become equipped with the facilities to handle future Debt Collection at very little extra cost. Of course, the small company will have to assign resources in order to take on the Debt Collection with their own resources which may be a problem, especially if the company is staffed with just the right number of members of staff. However it is hopeful that there will typically be one or two outstanding payers and so the time required to devote to Debt Collection should be minimal and may be absorbed into one or more members of staff existing workload. Compare this against the charges for each and every debt that solicitors and Debt Collection companies handle and the experience of the members of staff represents a considerable saving in the Debt Collection procedure for the small company.

When evaluating Debt Collection Software, the small company will always have to tackle it it from an amateur perspective and so the one with the best documentation or online help that can both show how the Debt Collection procedure works and also the important things to put into Debt Collection Letters that will convince the large company that it is better to pay the account than leave it as it is. The more help that the Debt Collection Software can supply when it comes to the contents of Debt Collection Letters, then the easier and faster the members of staff in the small company will become at generating good quality Debt Collection Letters. This help can come in the form of written samples in the documentation, but a better form would be electronic files such as templates that can be used as a basis for the real Debt Collection Letters. The Debt Collection Software should provide database programmed piece of Debt Collection Software can be clever. The debt can be first stored in the Debt Collection Software database and the Debt Collection Letters templates can be designed so that they will copy key fields in the database record and populate the live Debt Collection Letters with the correct information of the large company. The database functionality is quite important if the small company finds that it needs to take the large company to court. Before the court officials will accept the case they will need to see proof that the small company has made efforts in the Debt Collection procedure but failed to get the debt paid. The database could be set up to print off a report of the key events in the Debt Collection procedure such as Debt Collection Letters being composed and sent out, incoming letters and emails, phone calls being made and received, also copies of accounts and other paperwork. In this way the Debt Collection Software is doing vital work rather than the members of staff having to update manual records.

They say that prevention is better than cure, so in this context it will be better if the small company and large company have agreed a late payment clause in their contracts, so that both parties are aware of the results of withholding payments beyond the final date for payment. But if such a clause is not written into the contract then at least for the small company, help is available in the form of the “Late Payment of Commercial Debts (Interest) Act 2002”. This law firstly sets a date by which the account should be paid as 30 days from presentation of the account for services provided, or 30 days from delivery in the case of the supply of equipment. The small company has the option to request a single fee as some recompense for the Debt collection activity completed and also to charge daily interest on the outstanding debt balance. The rate of interest is governed by the date by which the debt becomes overdue, where debts that become overdue between January 1st and June 30th the rate is 8% over the Bank of England base rate as on December 31st of the previous year. For debts that become overdue between July 1st and December 31st, the rate is 8% over the base rate on June 30th. The single fee is fixed and is set by the value of the debt as follows:

For debts less than £1000, the charge is £40
£1000 to less than £10,000, the charge is £70
£10,000 and over, the charge is £100

This fee can be only be charged once for a specific debt, and it must be made clear that both of the charges that can be claimed from the law are not mandatory. The law also says that if the contract between small company and large company does contain a late payments clause then the law does not apply, provided that the clause provides adequate recompense for the small company.

Where a strong working relationship has been built up and the small company does not want to take the chance of foregoing future orders from the larger company, they would be advised to get in touch with the large company first and try and find out why the account has not been settled, only using the lawif they do not get a satisfactory answer. Before they do implement the charges they are best seeking advice, either paying for it by going to see a solicitor, or getting it for free from Business Link so that the small company can have confidence in what to do next.

The next steps to take if the account remains unpaid, even in part come down to three options in reality; a solicitor who specialises in Debt collection, an established Debt collection business and Debt collection software where by the small company takes the Debt collection operation in house. Whichever route is chosen there ought to be some margin of success in getting the account paid, via Debt collection letters, but the first two options come with costs that might be significant, whereas Debt collection software can cost under £100. The Debt collection software packages should be inspected to see if they have the right modules and content, such as registering of key activities, generation of valuable reports and most important of all, easy ways of creating good Debt collection letters, which are at the core of the Debt collection operation and also in maintaining the professional and ethical standing of the small company. The Debt collection software should provide examples or templates for the user to use to createtheir specific Debt collection letters and also there should be explanation of the law and how the Debt collection operation works in practice.

In the current economic downturn and when banks are still reluctant to lend finance to small businesses it could come as no surprise to find that small businesses have to wait longer for accounts to be settleled for work done or goods supplied to large businesses. It could be that the large company is itself waiting for its own accounts to be settleled, or it could be that they simply want to keep hold of their cash for as long as possible. While the small company could understand the issues that the economic downturn is causing to most businesses, their own issues will be their first priority and so they will want to press the large company to settle the invoice. They could view a court case as one option but this could end up as expensive especially if there is no guarantee of winning and being awarded costs from the large company, so this would be seen as a last resort to be used only when all other Debt collection activities have failed.

The first move that the small company should make is to get in touch with with the large company and find out why the invoice has gone over its final date for authorisation for payment. The reply from the large company could well decide the tactics for the small company, but they need to be aware that they will have to make efforts in Debt collection before they will be allowed to go to court, so they might as well make the effort and try and recover the debt. The small company could well look for the most economical option for Debt collection and so the charge of some 10% or more of the outstanding debt, which is levied by lawyers or Debt collection businesses, could seem rather high when the small company has a low cash flow. Debt collection software however, can be had for under £100 and this can become an inexpensive way for the small company to carry out the Debt collection procedure themselves. The small company need to evaluate Debt collection software packages carefully, paying attention to the Debt collection letters side as these form the heart of the Debt collection procedure since they show interaction between the parties, which could well be important if the case goes to court.

A good Debt collection software package need to give the user a good comprehension of the Debt collection procedure by the use of documentation or on-line education. The best way to generate Debt collection letters need to be described, while by the provision of samples of Debt collection letters applicable to each stage of the Debt collection procedure, the small company need to be able to generate their own, customised Debt collection letters. The small company will have to cater for resources being needed for the Debt collection software, such as one or more members of staff to run the system, a suitable PC to install the Debt collection software onto and a printer to print hard copies of the Debt collection letters. The Debt collection procedure should be a part-time procedure for the small company so the personnel aspect could not be so bad and of course if they need to cater for future Debt collection they are already set up with no extra cash to pay out.

By using personnel with a good standard of English and the guidance from the Debt collection software user guide, it is hopeful that the Debt collection letters will get the large company to settle the invoice and not to delay payment in the future and so a court case need to be avoided.

In normal circumstances a firm will require a bill to be settled in the month after the bill date but this must be stated in the contract and agreed by both parties, in writing. In the absence of such an agreement then in the event of dispute the law defaults to 30 days from the bill date as the last date for payment. Late payers can be the bane of small firm finances, as there could be a regularity to some; maybe they settle two months after the bill date or maybe they are frequently on time but are on occasion late. In any event it makes planning tough for the small firm to plan the future projects as they may have to pay for stock items that were used for the job concerned and whilst they may well have cash to pay their suppliers, they may have to commit to further supplies for other work and pay salaries, naturally. The late payer can cause difficulties in creating a shortfall in the books later on when it is time to pay their own bills, so how can the small firm advise the debtor to pay up without losing a valuable client? In any event the last thing the creditor wants to happen is to have no option but to write off a debt, so they must make the effort to collect them.

For a small firm the option may well be between managing the Debt collection internally, handing it over to a solicitor or commissioning a Debt collection business. The last two options can involve significant costs for a small ]company and so may be discounted by many. The in-house route will call for commitment in employee time, but by the use of a well written Debt collection software package the time spent can be optimised to do the work efficiently. Some applications are inexpensive, not cheap, and are on sale for under £50 including VAT. They might include either templates for the Debt collection letters or examples and instructions in the accompanying manual or e-book. These Debt collection letters are at the centre of the Debt collection process as they are what the debtor will see and can make or break the success of the process.

The Debt collection letters should be written in cool, unemotional and formal ways so that they don’t upset the debtor, whilst likewise demonstrating to them that the creditor is determined. Ideally the Debt collection software should include templates as this ought to make the experience of writing the Debt collection letters uncomplicated, next best would be an e-book, such as a pdf file from which sample Debt collection letters can be taken and then changed to customise them for the debtor firm. The least preferable method is to have to manually create a letter from an instruction manual as this it time consuming and can introduce errors, which are NOT wanted in Debt collection letters.

The e-book should lay out the stages of the Debt collection process and the Debt collection software should similarly use these stages for carrying out a Debt collection action. This procedure should recover many debts and will hopefully be a reminder to the debtors that you must be paid without delay next time. However with a view to needing to escalate a debt to using the legal system should the in-house process fail; the Debt collection software should have the functionality to record the activity at each stage of the process, covering those carried out when using the Debt collection software and external activity, such as incoming letters. In this way there is evidence that the creditor has made serious efforts to carry out the Debt collection already.

For small companies who have been working with large companies for years and find that at times the larger firm is slow in paying the bills, this can be a frustrating situation to be in. On the one hand the small firm needs to be paid if it is to stay in business, but it also needs to keep on good terms with the large firm in order to keep a steady flow of work.

There is legislation in place in the form of the “Late Payment of Commercial Debts (Interest) Act 2002”, which allows the small firm the right of imposing a one-off charge as well as daily interest, if it so chooses, to puch the large firm to pay the invoice. Whether or not to use this law is a hard question for the small firm, but if the large firm has been paying late in the past, it might be wise to sort out this issue, before resorting to Debt collection strategy.

To start the small firm should contact the large firm and try to discuss the matter face to face in the hope of achieving a suitable solution, but if this fails then they might have to resort to Debt collection processes.
The small firm might think that their only choice is to see a solicitor and see if they can help. Any solicitor may know about the aforementioned law, but one who specialises in Debt collection might be able to show evidence of how successful they have been in using this in cases, perhaps some Debt collection letters, which of course will have had client details blocked out.

If the small firm is suffering cash flow problems then the fees of using a solicitor or a Debt collection agency might be prohibitive and so they might need to look to Debt collection software that they can buy in order to do the job themselves. They would need to carefully examine Debt collection software packages that they find in order to choose one that has the right features. The creating of Debt collection letters is the key to the Debt collection strategy and the Debt collection software must provide the user with an easy way of creating Debt collection letters that are written in ethical and unemotional terms, applying key aspects of the law where relevant. It is vital that the Debt collection letters are written to stress the positives of the existing partnership such as; proven work standards, fully trained personnel, and quick response to vital issues.

In the end, it would be unwise for either the large firm or the small firm to break off relations. The large firm would have to start looking for a firm to take the place of one that they know well and are satisfied with the work and whose workers know the large firm as well as their safety procedures and are probably on good relations with the workers of the large firm. The small firm will have to look for work elsewhere as they might well have only worked for the one large firm and now are faced with trying to sell their services elsewhere in order to keep their staff and keep the firm going.
So renegotiating the contract with a clause for late payments would be a good move for both parties

When a small firm has done regular work for a larger firm they may discover that they have less opportunity to do work for other enterprises and so may start to depend to some extent on this larger firm for their business security. In these still tight financial times, good contacts are valuable and should be retained, but if they are also regular late payers, this can put a strain on the finances of the small firm. The small firm might thus find themselves treading a fine line between convincing the larger firm to pay on time and losing them altogether and so making their firm suffer, possibly to a great extent. If the small firm has not been in this situation in the past then they might need advice on how to best tackle this difficulty but the costs that could be involved in the various options may well be a deciding factor. Essentially there are three methods of achieving the objective of keeping hold of the customer and getting paid in timely fashion in the future; a Debt collection business, a solicitor, or a DIY package that includes Debt collection software and Debt collection letters. The last option is not only the cheapest but will also allow the small firm to do the work in-house, which gives them control of the process, but does require resource to be identified.

The key to keeping the customer is really to approach them in a professional, courteous and unemotional manner as this will not only hopefully prove successful but will also put the small firm in a good light as a professional outfit. To achieve this, the Debt collection software has to be able to supply Debt collection letters that meet the above requirements and also stress the importance of prompt payment to the small firm. Any decent package of Debt collection software must come with a manualthat explains clearly how the Debt collection process works and worked examples would be so useful in making this clear, as well as showing how the Debt collection software itself works.

Since the Debt collection letters are at the core of the Debt collection process the small firm must need to know that they have the tools to compose suitable Debt collection letters, since it may well take more than one to reach a satisfactory conclusion. It would be best if such Debt collection letters were provided as either examples or templates in the Debt collection software, so that the small firm can easily tailor them with details of the large company and the debt. Better still if these details can be input into the software and then automatically pulled in to each Debt collection letter it would be much easier.

There is legislation available to companies in the form of the “Late Payment of Commercial Debts (Interest) Act 2002”, which allows the small firm, i.e. the creditor, to make a one off charge against the large firm, i.e. the debtor, for an overdue payment, as well as this they can also charge interest on the outstanding debt. The creditor does not have to make these charges, but it would be a wise move to try and agree with the debtor that this should be part of a revised contract, so that both parties have agreed that payments must be made on time and there will be no need for a Debt collection process.

For small firms that are waiting to be paid for projects they have finished or items they have delivered to a larger organisation, once the deadline for payment has passed they may need to think about their Debt collection choices.

The deadline for payment may have been agreed in the original contracts between the two or more parties, if not then the “Late Payment of Commercial Debts (Interest) Act 2002” sets this as 30 days from either date of the despatch of items, or the date an bill was presented.

This legislation also permits the debtor to make a one-off charge to compensate for Debt collection activity as follows:
For debts less than £1000, the charge is £40
£1000 to less than £10,000, the charge is £70
£10,000 and over, the charge is £100

To make the Debt collection procedure easier, the legislation permits Interest to be charged on a daily basis at a rate of 8% over the Bank of England base rate, where if the debt becomes unpaid on or before June 30th, the base rate at December 31st of the previous year is used and for debts that are unpaid on or after July 1st, the base rate on June 30th will be used.
Although the small organisation has this legislation at their disposal, if they have developed a good working relationship with the larger organisation then they may feel it could harm their good standing if they suddenly inform the larger organisation that they will apply it.

They may prefer to take a more measured approach and maybe take on a local solicitor who specialises in Debt collection and can be relied on to create suitably worded Debt collection letters to persuade the larger organisation to settle the bill. They may approach a Debt collection company that may have been recommended, if not then they are well advised to do some research into any that they are thinking of using. If the small organisation has had to handle Debt collection before and used one of these choices they may wish to save on costs and try and do it themselves by purchasing a Debt collection software package. It is necessary that such an application includes a good user guide which explains the Debt collection procedure, the legislation, and the best way to create Debt collection letters that are in a professional and unemotional tone, to keep that all important relationship with the larger organisation.
With the do it yourself strategy the small organisation has to realise that they need to take on the record keeping side of Debt collection, something that would be carried out by a solicitor’s office or a Debt collection company, as part of their service. The Debt collection software should address this component in that it should use a database to store information, such as the details of the debt being pursued, copies of Debt collection letters that were created and posted or emailed, scanned copies of documents received in the post, and any email conversations that take place. For phone calls, some Debt collection software may have a recording function to store the call as a sound file, or maybe speech recognition software that can produce a text copy, although this can be unreliable.
The record keeping is necessary if the case the case goes to court so that the small organisation can demonstrate what actions were taken in the Debt collection procedure prior to court, so any dubiously translated sound files would be thrown out. The Debt collection letters can be the key to a successful court case and so care must be taken with them.

Debt collection software can provide a cost effective method of handling Debt Collection for a small organisation that is faced with an late invoice for work completed or goods supplied to a large organisation. Given that legal practices and Debt Collection agencies take a cut of each and every debt, which can be 8% to 10% or more and that’s without additional court costs if the Debt Collection operation goes that far, so a one off investment of some £100 or less on a Debt Collection Software package can look tempting. The drawback with doing the Debt Collection operation in-house is that the small organisation will have to both find resources to operate the Debt Collection Software and also learn knowledge of the Debt Collection operation itself.

The resources needed include workers to operate the Debt Collection Software and to understand how it works so that issues could be addressed. The Debt Collection Software itself could require hardware such as a better computer that the small organisation could have on hand; likewise a good quality printer will be wanted to print off Debt Collection Letters, which could be served by an office laser printer perhaps. The workers chosen to operate the Debt Collection Software will need to be computer literate and also have a good command of English in order to write good quality Debt Collection Letters. The Debt Collection Software should come with a good manual to help the workers to learn about the Debt Collection operation and what sort of things to put in the Debt Collection Letters that will inform the large organisation that the small organisation is professional, ethical and doesn’t want to wait for their cash. In order to help the workers to write good Debt Collection Letters the Debt Collection Software should contain samples of Debt Collection Letters for each part of the Debt Collection operation so that the workers can copy them and update them as required to save time in having to write new Debt Collection Letters each time.

The Debt Collection Software should either have a database itself or have the connectivity for other database applications for example Oracle, for the purposes of recording all of the actions that take place in the Debt Collection operation such as creating and sending out Debt Collection Letters, recording incoming letters or emails and phone calls. It would work best of the Debt Collection Software could first of all record the details of the large organisation and the debt itself, such as the final payment date and value at that time, also if the small organisation is adding interest, the percentage and when it is to be charged. In this way the Debt Collection Software could then be used to write Debt Collection Letters that could include all of the personalised details of the large organisation and the debt, but also generate new accounts automatically that could be posted along with the Debt Collection Letters.

Once the workers in the small organisation have used the Debt Collection Software for one or two late accounts, they should be able to run with any late bills easily at small cost to the small organisation itself, whereas with a solicitor or Debt Collection agencies, they pay for every debt.

When a small business has been working on projects with a large business for many years, there will have been a good professional relationship built over that time and one which needs to be preserved as it can bring in an ongoing flow of work for the small business. However if the large business has an exemplary payment record up to now but the small business finds that the last account they sent in still has not been settled their first thought may well be to just make contact with the finance department of the large business and sort out what may just be a simple mistake. But suppose that the response proves unsatisfactory and the account still has not been paid, the small business will want some way of stressing to the large business that their account is important to their cash flow, while at the same time being careful not to tarnish the professional relationship that has taken so long to nurture.

The options for Debt Collection at first may seem to be only either solicitors or Debt Collection organisations, but even those which are experienced in commercial Debt Collection may not be so careful to save the professional relationship. After all, once either solicitors or Debt Collection organisations take on the Debt Collection process for the small business, apart from any up front charges, the main charge they collect is probably a percentage of the debt, paid on settlement. Therefore it is in the best interests of the solicitors or Debt Collection organisations to get the debt settled at all costs. If Debt Collection Letters fail they may then go to court and issue a winding up order on the large business. All this will be done in the name of the small business and so even if the large business survives the winding up order they may well be unwilling to use the services of the small business again. Also word is sure to get round in the business areas and this situation may well cause the fortunes of the small business to suffer, so putting more people out of work.

The small business may be best to investigate taking on Debt Collection themselves and investigate Debt Collection Software packages, at least then they will be masters of their own destiny. They should go for a Debt Collection Software package that comes with a good manual which explains how the Debt Collection process works and how to write effective Debt Collection Letters. By taking the Debt Collection process themselves, the small business will have to ear mark enough resources to the Debt Collection Software, in the shape of personnel to operate it and IT equipment to run it on. The personnel will ideally be computer literate and also crucially have a good command of English since the Debt Collection Letters are at the centre of the Debt Collection process, it is important that these Debt Collection Letters are generated in an unemotional and courteous way and with no spelling or grammatical issues. In this way the small business should get the rewards out of the Debt Collection Software and develop the skills to write good quality Debt Collection Letters that they will not only secure their professional relationship but get the account paid and also be equipped to handle future Debt Collection at very little extra cost.