CREDIT CONTROL ROAD MAP

A SALE IS NOT A SALE UNTIL PAYMENT HAS BEEN MADE

Cash is the lifeblood of all businesses. Without adequate cash flow there cannot be sufficient turnover and an acceptable level of profit cannot be achieved.

The slow or late payer has a particularly damaging effect on cash flow and therefore turnover and profit.

Credit control is vitally important.

REMEMBER: KNOW YOUR CUSTOMER

You will have a continuing relationship with some customers. These customers will purchase goods or services from you on a regular basis and make payment, say, 30 days thereafter.

Attached is a specimen application for a credit account (see Appendix D). Before goods or services are supplied to customers who are to pay later it is important that the application for the credit account is completed and credit worthiness is established. If, despite all your care, payment is not made, the information on the application form for credit will be useful in the event that court proceedings have to be issued.

It is important that you take up references. A specimen letter is attached at Appendix A.

Another step which is worth taking, particularly in the case of unincorporated businesses is to carry out a search at a credit reference agency. Similarly, in the case of limited companies, it is always worthwhile commissioning a company search.

REMEMBER: IF THERE'S ANY DOUBT, YOU ARE BETTER ADVISED NOT TO SUPPLY. THERE'S NO POINT IN NOT BEING PAID FOR YOUR EFFORTS

Keep an eye on debts which are owed to you. If the date for payment passes and no money materialises then chase payment, either by telephone or in writing. A specimen letter is attached. In the event that your reminder has no effect then the only way of recovering the money will be to take court proceedings. One point to consider before issuing proceedings is whether the defendant has the money to settle the judgment. If not, the process of proceedings will not be worthwhile.

All proceedings are issued through the local County Court. Form N1 is the form used to commence proceedings. You can issue this through:

Lincoln County Court
360 High Street,
Lincoln,
LN5 7PS,

telephone 01522 88300.

You will need to check the current issue fee with the court which is based on the amount you are claiming including any interest claimed. Cheques are payable to "HMCS." You cannot claim any other legal costs unless issued through solicitors.

Where a claim is under £5,000 and it is defended then it is transferred to the Small Claims Track and is usually dealt with by the District Judge without the assistance of legal representation to the parties. The reason for this is that the courts try to minimise legal costs and only rarely make a costs order against the losing party where solicitors have been instructed to act.

Where you are dealing directly with your opponent either by telephone or face to face then we would advise that you keep notes of what is said together with the dates and time. This should include statements made by the customer and also your responses. We also advise that you keep copies of any letters, faxes or emails as they may be required in evidence if you cannot reach an acceptable agreement and it results in a defended court action.

Unless your conditions of sale or conditions of business state otherwise and the sale or deal is with a commercial customer then you will be able to claim interest from the date the invoices became due and payable under the Late Payment of Commercial Debts (Interest) Act 1998. This is currently set at 8% plus the Bank of England base rate.

So, what next if you have obtained your judgment and the debtor fails to pay? If the debt is under £600 then you can instruct the County Court Bailiff. You should use Form N323 to issue the warrant of execution. Again, there is a fee to pay which may be recoverable from the debtor. You can obtain details of current fees from the Lincoln County Court.

Alternatively, if the judgment is for over £600 and a figure in excess of £600 is still owed after taking into account any credits or payments made, then you can apply to:

High Court Enforcement Officer at Nottingham,
Cumberland House,
35 Park Road,
Nottingham,
NG1 6EE,

telephone 01159 886220

To register the judgment in the High Court and to enforce it you will need to send a copy of the original judgment to the High Court Enforcement Officer (HCEO) together with a cheque for the court fee, which is currently £50 and made payable to "HMCS." The enforcement is then dealt with by the HCEO thereafter to include continuing interest at 8% from the judgment date, enforcement fees and any other costs which are all payable by the debtor.

If the HCEO fails to recover anything from the debtor then there is usually a fee payable to the HCEO by you. This is currently restricted to £60 plus VAT for each named property visited by the HCEO however many visits he may make to that property to meet with the defendant. Usually, the address which he would visit would be either the trading address or a home address where the defendant is an individual or trading in his own name. You may instruct HCEO to attend at any or all of the debtors' addresses known to you.

We can advise on other methods of enforcement such as charging orders and garnishees.

The judgment will remain registered with the Registry Trust for 6 years and is usually noted by the credit references agencies such as Experian. Where a judgment is fully paid then you should acknowledge this in writing to the defendant and advise him to file a copy with the County Court together with a fee of £15 and request that the judgment is noted as paid or settled. The fee is payable by the debtor, not you. The Court should then notify the Registry Trust that the records are to be marked as "judgment satisfied."

REMEMBER: AN EFFECTIVE CREDIT CONTROL POLICY REQUIRES A FIRM, DISCIPLINED AND DECISIVE APPROACH

If you require any further assistance or information please do not hesitate to contact a member of our employment and dispute resolution team.

The Court Service website contains useful information including the addresses of all county courts in England and Wales and additionally Form N1 and N323 can be downloaded from the website www.hmcourts-service.gov.uk.

Download FREE Appendix Pack (MS Word™)

Contains:
Sample letter requesting reference
Specimen claim form to be used with Form N1
Letter chasing debt
Application for credit account
Court and enforcement fees
Credit control flow chart