1111/111 ention debt collectors to most hauliers, and YOU conjure up visions of bruisers wielding pickaxe handles.
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While there's no denying that there are gentlemen who conduct business in such a fashion, many collectors operate perfectly legally without recourse to threats or violence. What's more, they get results, says Tony Bushell, managing director of Euler Trade Indemnity Collections, the largest collector of commercial debts in Britain. It is part of Euler Trade Indemnity, a major credit insurance company, and it operates worldwide.
Clear paperwork makes collection much easier, says Bushell, and all hauliers should have written agreements with their customers detailing terms and conditions of trading, the price being charged for the job and when they expect to get paid.
Under the Late Payment of Commercial Debts (Interest) Act 1998, you are legally entitled to charge interest on the money you are owed if payment isn't made on the agreed date, says Stephen Lewis. He's president of the Credit Services Association (CSA), which represents debt collectors and to which Euler belongs. Membership is an indication that a collector is reputable.
At present the act allows only firms with fewer than 50 people to claim interest (at base rate plus 8%) from major companies and the public sector. But from November 2002 all businesses and public-sector bodies of whatever size will be able to claim interest from one another.
Lewis, a senior partner at LPL Commercial Investigations, strongly recommends the use of an agency such as Equifax to check a business's creditworthiness before any trading is done. If you avoid poor credit risks, bad debts are less likely to arise.
It's a policy pursued by 011is Transport, says that company's commercial director, Stephen Hall. 011is asks all its customers to fill in a credit account application form with a standard payment period of 30 days.
We don't take on work over the phone on an ad hoc basis, and we have an in-house credit control department which starts chasing as soon as payment is late," he adds. "We've never resorted to debt collectors, but we will take county court action if we have to."
" If you're not paid on time, then you should certainly chase the customer by phone to find out what is going on," Euler's Bushell advises. But if all you get is excuses you should refer the matter to somebody like us."
You should probably think about doing this if you haven't received a cheque within 30 days of the end of the agreed credit period, he suggests.
"Some firms come to us if payment is one day overdue, some when its too days overdue," he reports. "Whichever policy you adopt, always bear in mind that the younger the debt is. the better chance we have of collecting it."
Once Euler is involved, it will send the company that owes the money a polite but firm letter asking it to pay up or give a reason why payment hasn't been made. "About 20% of them will respond immediately," he says. If we get no reaction we'll contact them again 48 hours later to find out what the difficulty is."
Polite and persistent contact— stopping well short of anything that might be construed as harassment—will continue there
after until the matter is resolved.
Often just the fact that a third party is involved will galvanise non-payers into reaching for their cheque books.
There's another reason a call from Euler can provoke a rapid reaction, although it's one Bushell's collectors are careful never to allude to. Failure to pay a debt will be recorded on Euler's database, and could become an issue if the company concerned subsequently applies for credit insurance.
If the debtor is in serious financial difficulties, Euler may attempt to arrange a repayment schedule. If, however, the firm owing the money has the cash and doesn't deny there's an outstanding bill, but won't do anything about it, Euler may recommend legal action.
"Typically that's after four weeks, but it could be within 24 hours, depending on the circumstances," says Bushell. "Court action can be very successful. We have in-house lawyers, and can handle the case on a fixed-fee basis."
If the debt has been incurred overseas, it will be referred to Euler's international department. "The people there speak seven languages fluently, and they'll start by sending a fax to the debtor—in English, because. surprisingly, that seems to be more effective," he says. "We give them five days, then we contact them by phone. In nine cases out of to our overseas collection agents will end up handling the case."
So how effective is Euler at collecting cash? That depends on the "quality" of the debt. If it's
been incurred recently and tF company concerned has the cas but won't part with it without struggle, the success rate nearly I 00%. This falls, howeve as the debt ages. "Our average about 70%, prior to cou action," he estimates.
"We have two rating stru. tures," Bushell explains. "If yo use us only occasionally, IA charge an 8% commission on th first L5,000 we collect, 4% on th next L5,000 and 2% on the ba ance. Use us a lot and those pe centages will fall to 5%, 3% an 2% respectively."
The commission is subject to minimum fee of £25 for a sw cessful collection. "We'll colle■ debts of any size," Bushell add: "even as little as Ltoo." No con missions or fees are charged the debtor doesn't cough up.
Commissions for the coil& tion of overseas debts are muc higher—anywhere from 15% t as high as 40%, depending o the country involved—and, L5o, the minimum fee is highE too. In addition, there's a L5. "placement" fee which has to b paid whether or not the clier gets his money.
Asking a debt collector t chase money doesn't mean yo will necessarily lose that cur tomer, Stephen Lewis argue "You may instead win respect fc having a professional approac: to credit control."
Small claims
Hauliers can always pursue debt of less than £5,000 themselves b using the county court's fast-trac small claims procedure, I ssuin proceedings can cost as little a L3o for aboo debt, but althougl the system is easy to use an interest on the debt can b claimed, it's time-consuming i you're doing it yourself, say LPL:s Stephen Lewis.
The bottom line is that trying t. collect debts by sending round couple of thugs armed with bast ball bats could land a haulier serious trouble with the polict Lewis warns that threats of vic lence uttered by yourself or pec pie acting on your behalf, verball or in writing, represent a breadl of the criminal law—no matte how justified they may seem.