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What should credit controllers be doing during all of this down time?

13 May 2020 Written by Stephen Cowan Category: Blog

When I give a presentation about legal recoveries, I usually start it by describing the various steps which a credit controller should take before referring an outstanding debt to their lawyer. Essentially, my recommendation is that the controller exhaust their own collection activity before passing the debt to us. Of course, what this will involve entirely depends upon that organisation’s individual credit control policy.

However, generally it will encompass:

  • Identifying which accounts have to be chased and when that should start. Typically, this may range from 14-28 days after the invoice has been rendered;
  • If there has been no response, then the customer should be contacted by phone, e-mail or, perhaps, a combination of the two;
  • After a defined number of days, further chasing will take place. There will be time intervals between communications and these will be shorter as time and non-payment progress;
  • A personal visit to the debtor’s premises may be called for, depending on the level of the debt and how concerned the credit controllers is;
  • Once the collection cycle is complete, the credit controller will have to decide whether to refer the matter to a third party, such as Yuill + Kyle.

Once I have finished the introduction, I say that the foregoing pre-supposes that the creditor’s house is in order and that perfection exists. So, my assumption is that all of the accounts being passed to their lawyers are “clean”; that they have been reviewed; that they represent the true balances outstanding; and are without dispute. So, basically I presume that when these accounts are being passed, “perfection” pervades. I imagine that when the debtor was contacted by the client, there has been an accurately detailed account history stated and that the actual amount due to be paid is, in fact, due.

However, we all know that perfection, whilst desired, is unlikely to exist. But if it did, then the chances of successful recovery will immeasurably improve. Whilst we know that precision may be the nirvana, reality has to pervade and credit controllers must face the reality that their ledger of “outstandings” may not be as unblemished as it should be.

So, during this period of lockdown, what steps should the conscientious credit controller take to review the ledger and improve their recovery prospects?

Here are a few pointers which I hope you will find useful:

  • Ensure that your outstanding invoices are accurate and that the supporting statement of account reflects these invoices. Have any credit notes been issued? If they have been, then these should be detailed in the statement;
  • Have your invoices been sent to the correct address? Perhaps these have been sent to the customer's depot as opposed to their head office where accounts receivables are processed;
  • Have you identified the individual in the debtor organisation who is actually responsible for approving your invoices for payment? Do you have their phone number and e-mail address? Chasing your account will be so much easier and effective if you have this information;
  • Have you addressed any outstanding account queries? If your customer has raised any issues arguing why the account has not been paid, have you satisfactorily resolved the problem? If you have, then have you told your opposite number that the problem has been resolved? Conversely, if your investigations do not disclose any outstanding issues, have you asked your counterpart to confirm this?
  • If your customer is a limited company, when was the last time you examined a credit report? If not, then you should do this now. Look out for recent judgments registered against the company; changes in directors; changes in registered office; possible reduction of capital and any changes in their credit score;
  • If you hold personal guarantees, how valuable are these? Does the guarantor still live at the same address as stated in the guarantee? Do they own their house and, if they do, is it likely there is equity in it? This information can easily be checked by us conducting a Registers of Scotland property search;
  • Perhaps an obvious question, but have you invoiced the correct legal person? For example, if you traded with “Smith + Jones Ltd”, there is no point in invoicing “Billy Smith”. Billy is not liable for the debt, the limited company is.

If you follow this advice and cleanse your sales ledger, this will be time well spent. It will mean that when the time is right and you do want to recommence chasing your outstanding accounts, then all of the information which you have will be up-to-date and accurate. This will translate into a far greater recovery rate and ultimately a reduction in your debtor days. It may even mean that your requirement to refer to third party for collection will be dramatically reduced.

However, if all else fails and you do need to make that referral, then Yuill + Kyle is here to help with all of your credit control and debt recovery needs, whether this be pre-legal, legal action or post judgment recoveries.

As ever, please This email address is being protected from spambots. You need JavaScript enabled to view it. if you have any questions.

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